Process Improvement or Enhancements

PIE/PEP – whatever you want to call it, process improvements or enhancements has the potential to disrupt normal workflows and really upset your staff and possibly customers or vendors.

Process enhancements will bring change in the organization, as such it is important to look at the change carefully and perform the necessary analysis before implementing the change.

When you decide to undertake any process change you need to examine the need for this change, what is the imputes for the change?

All changes in any size of organization has risk – you need to weigh the risks to decide whether the change will benefit the organization.

Lets put together a scenario in a fictitious consumer electronics business that sells its products through retail outlets which in turn sells those products to the  consumer – you and I.

This company ABCD Consumer Electronics (ABCDCE) sends out hundreds of packages per day, they also receive dozens of packages from the merchants they supply.  These are either RMAs or defective products being returned.

Facts:

ABCDCE charges merchants to ship product to them.

ABCDCE does not charge merchants for returned merchandise, either RMA or defective.  They issue a CALL TAG to have the items picked up at their cost.

ABCDCE expedites ALL defective items back to the merchant using overnight service once the item is repaired.  This cost is not charged back to the merchant, though is mentioned in the contracts that the merchant signs with ABCDCE.  The merchants have come to expect this service.

ABCDCE has been doing business this way for 5 years, however in the recent downturn has started to look at processes in all departments – from Accounting to Sales, to Customer Service and in Shipping and Receiving.

As part of this process review, the company management has also decided to review expenses related to the core business to see if other contracts for services can be renegotiated.

After having reviewed their manufacturing processes, it’s determined that the rate of returns of defective merchandise is will within and in fact is below estimated rates – so no changes are needed with respect to manufacturing.

The management decides, upon review of sales contracts and discussion with the RMA department that they need to start charging merchants for shipping costs of items being sent back to them.  The contract specifies that ABCDCE will ship items to the merchant upon completion of repair using ground shipping.  However for years it’s been done via overnight.  This added 30% to the cost of repairs.

The decision has been made.  What are the risks?

In part two of this post, we’ll go into just a few of the risks and the process change that needs to be put in place in order to minimize the impact to internal teams (remember, this change will impact more than the RMA department if ABCDCE wants to recover the shipping costs from the merchants they serve).