Problem
ABC Corporation is a leading manufacturer of personal computers. Imagine that you are hired by ABC Corp. to analyze their sales order process and to recommend any suitable changes to make it more efficient. Currently, the entire sales order processing cycle takes anywhere between 30 and 45 days. This long cycle-time negatively impacts ABC Corp. performance in many ways. Your task is to analyze the sales order process and propose a process that is much more efficient and a lot shorter.
Based on your interviews with the people in sales, production, purchase, logistics, and accounting you have gathered the current process. The following paragraphs describe typical steps in sales order processing.
The customer responds to a sales brochure and then calls the sales department and requests a quote for 100 custom-made personal computers. The salesperson creates a quotation on the basis of this inquiry and standard pricing charts. Upon the customer's acceptance of the quotation, the salesperson creates a sales order based on the customer's request and incorporates any special conditions. The sales order is sent to the production department, the accounting department (for checking customer's credit). Production person checks for product availability and lets the salesperson know about the tentative delivery date. The accounting person checks the customer's credit and lets the salesperson know about the creditworthiness of the customer. Based on these inputs, the salesperson in turn lets the customer know about it. If needed, the salesperson may alter the terms and conditions of the order and lets the customer, production, and accounting know about it.
The production planning person makes a decision on what components need to be produced internally and what needs to be purchased from third-party vendors. Based on the inventory check, in this example, the company decides to purchase keyboards, mouse, and speakers from vendors. For these purchases, the procurement person makes a decision on which vendor or vendors will be used. Request for quotation is created and issued to a number of vendors. After the bidding process takes place, a vendor is chosen. A date then is set for delivery of the keyboards, mouse, and speakers. The purchase also considers the scheduled delivery date of the computers to make sure that components arrive well before them. If needed, additional expenses may be incurred to get the components quickly. If the purchase order exceeds a certain amount, accounting may be involved in getting the prior authorization. Accounting also handles all invoices, payment schedules for the payments to the vendors for their products.
Once the necessary components arrive, the personal computers are then assembled and sent to the product's logistics area. Logistics checks the shipment options to make sure the computer reaches the customer by the scheduled delivery date. If there were delays in the delivery of the computers then there may be penalties levied on ABC Corp. Finally, 100 personal computers are produced and send to the customer. Based on the input from logistics, accounting creates the necessary invoice and handles all customer payment-related activities. The whole process takes anywhere between 30 and 45 days.
Based on the description of activities, answer the following questions:
a) What sort of Manufacturing operation does the ABC Corp. have (MTO or MTS)?
b) State at least 3 areas where you will modify the process to reduce the cycle time.
c) What will be the cycle time if your proposed changes are implemented?