Process Improvements With Measurable Results

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Supply Chain Operations: Order Management

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Consumer Packaged Goods

North America

Project Descriptions:

Order management operations improvement effort for a major division of one of the world’s largest cosmetics producers

  • 80 luxury brands
  • Diverse retail channels

Scope of Project:

  • Customer service: Order receipt/release
  • Credit and collections: Cash application, returns, deduction resolution, check distribution, invoice collection
  • Information and control: Master data and inventory
  • Shared services: Vendor managed inventory and e-commerce

Improvement Benefits:

    • Operating cost 16%
    • Head count 14%
    • Break even point 6 mos.
    • ROI (12 month) 2.2x
    • Abandoned call rate5%
    • Line fill rate8%
    • Receivables [DSO]18%

 

Situation Analysis:

ClientCo is one of the world’s largest cosmetics firm with annual revenues exceeding $20 billion. ClientCo USA provides roughly 30% of this volume and its order management group for a major business line supports 80 brands across multiple retail channels.

Several factors drove ClientCo senior management to seek rapid order management improvement: Recent technology deployment created pressure on existing, inefficient order processes while an acquisition increased volume by over 25%. Customers pushed for leaner inventories, demanding increased service performance: fewer errors, increased flexibility, more visibility of orders, and more. 

Improvements Identified:

An eight-week, Phase I analysis using The Lab’s template-based approach identified 125 improvement opportunities. Over 70% required no changes in existing technology, products or distribution strategy. All could be implemented in less than six months. Examples:

  1. Mis-prioritized Customer Service - Carefully established e-commerce algorithms and service priorities were superseded by senior-level-management manual intervention. Result: small customers bumped the largest, most profitable to the bottom of the queue. Extensive rework was required—if the problem was noticed.
  2. Under-managed Inbound Data - Over 85% of customer setups and changes bypassed the sales staff into the Master Data organization, creating errors, misunderstanding and [sometimes] credit losses. Improvements included: centralized intake and contact point; segmentation and prioritization of work; consistent notification of sales team.
  3. Excessive Internal Blocks/Holds - Numerous internal blocks on returns, payments and other transactions substantially exceeded comparable benchmarks. The resolution process offered numerous improvements: simplification, standardization, clearer accountability.
  4. Misaligned Metrics - Service Level Agreements [SLAs] were in place with customers but not among internal groups that drove related service performance. Basic info was tracked for service requests, but segmentation and prioritization was lacking, i.e., simple/complex, small/large, urgent/routine.

Overall Results:

The five-month implementation plan targeted an immediate-action [1-2 month] documented service improvement and a simultaneous labor cost reduction [15%].