Collected data on shipping charges for 52 roughly consecutive weeks to approximate annual shipping costs
Total shipping costs = $19,113.49
Unavoidable shipping costs = $18,695.34
Avoidable shipping costs = $418.15
Collected data on return authorizations assigned for same time period:
37 issued in 1996 total
18 issued in data collection period
Implementation (scheduled for 04/23/98):
Short-term
Separate dead stock from active stock physically
Clearly label each item showing stock number, title, and minimum quantity required in stock
Organize shelf space so that stock is presented in numerical order on shelving
Mid-term
Development of minimum quantity required in stock after analysis of seasonal demand, trend demand, and explainable irregular demand (timing of certification testing)
Development of inventory check sheet which makes management of inventory more user-friendly and encourages use
Long-term
APC�s owners already have plans to build additional office and/or warehouse space in the adjacent lots that they recently acquired. We spoke to them about the possibility of removing the almost self-contained Shipping/Order Fulfillment Department fro
m the printing floor to a corner of the new building. This would cut down on the amount of books that are soiled and unsalable. A more functional storage system could be designed incorporating such useful things as shelf space that is not too deep, stor
age for frequently used items like packing tape and packing materials, and separate storage space for each box size which will make it easier to identify when box inventory is reaching critical levels.
Process Improvement Goals:
We believe that our process improvement will save the company a minimum of 2.2% of total shipping costs annually
Approximately $420 in data collection period
Average cost of $23 per occurrence
We believe that our process improvement will save the company an average of 50 minutes per occurrence
50 minute estimate comprised of:
15 minutes to take customer�s call, complete RA log and RA form
5 minutes to complete UPS call tag
5 minutes to generate shipping documents
15 minutes to pull correct item, pack item, and complete UPS shipping log
10 minutes to receive return, complete RA log and RA form, and restock item
50 minutes x 8.00 per hour = $6.67 per occurrence
We believe that our process improvement will generate improved customer satisfaction, which has immeasurable benefit to Athens Printing Company
At a minimum, we should be able to save APC $29.67 for each occurrence eliminated by our plan:
1996 � 37 x $29.67 = $1,097.79
1997 � 18 x $29.67 = $534.06
Our plan has additional benefits:
Ability to pack regular orders in less time
Time estimates on pulling and packing a single invoice vary widely because an invoice may be for a single book which is packed in a self-sealing bubble envelope or a bookstore order for 25 of the thickest titles which must be packed into three separat
e boxes
APC estimates that their shipping clerk spends roughly 3 hours per day x 5 days per week x 52 weeks per year = 780 hours per year packing x $8.00 per hour = $6,240.00
1,699 invoices process in 1997
Cost to pack each invoice is $6,240.00 / 1,699 = $3.67 per invoice
New organization and shelf labels enable orders to be pulled and packed in approximately 30-40% less time
This translates into savings of $1,872.00 - $2,496.00
Weekly inventory checklist enables management more control over their planning
Fewer lost sales due to out-of-stock situations means increased profits
Reduced necessity of last-minute need to print books in uneconomically small lot sizes means reduced costs
Packing may be done by other employees when shipping clerk is busy or out sick
Organization and shelf tags enable other employees to pack efficiently
Packing may be delegated to other employees who have lower hourly wage rates
Cost to implement plan:
Physical organization of shipping area � 4 hours x $8.00 = $32.00
Shelf Labels - 16 pages x (.50 to laminate + .05 to print) = $8.80
Total Cost to Implement Plan is $40.80
Total Cost vs. Total Possible Savings
Total Cost = $40.80
Total Savings = $3,030.06 (assume 40% efficiency rating)
Total Cost/Total Savings = 1.3465%
High return produced at a low cost was a highly desirable attribute at APC, where cash flow is sometimes a problem and management is closely held and very resistant to severe/rapid change
Post-Implementation Data
Zero requests for Return Authorizations due to receipt of wrong title
30-40% improvement in efficiency of packing per interview with Janet Field and shipping clerk
Zero occurrences of out-of-stock situations
Recognition of excessive levels of dead stock � management has decided to sell dead stock at greatly reduced prices and eliminate the cost of holding this unprofitable inventory. They enacted a plan to print a small flyer in house that lists the inve
ntory and prices, which will be inserted into each box as current orders are filled.
Recognition of existence of seasonal demand, trend demand, and explainable irregular demand � planning for increased inventory levels just prior to certification exams and university book-rushes as well as decreased inventory levels suggested by slugg
ish sales will increase profits
Conclusion
Our process improvement project was an exciting experience for Athens Printing Company. They, being a small family-owned business, were fertile ground for our suggestions. The implementation was constrained by a shortage of time and money at APC. H
owever, this tended not to be a problem since we were ever mindful of the �do-able� aspect of our proposal. Fortunately, the management was quite receptive and our ideas were approved and implemented. Once implementation had been accomplished, a semi ch
ain-reaction was set off. They are more motivated to seek process improvement in other areas of their business now that it has been demonstrated that change does not bear an excessive cost.