project description:
DESCRIPTION
Six Sigma Project Title Reduce incidence of returned Request for Purchase (RP ) Project No.: OAS-07-009 (23 September 2007). - PowerPoint PPT PresentationTRANSCRIPT
11
Six Sigma Project TitleSix Sigma Project Title
Reduce incidence of returned Reduce incidence of returned Request for Purchase (RPRequest for Purchase (RP))
Project No.: OAS-07-009Project No.: OAS-07-009 (23 September 2007)(23 September 2007)
22
Division Champion: Division Champion: Cécile LHF GregoryCécile LHF GregoryChampion: Champion: Paulino P. Santiago, Jr.Paulino P. Santiago, Jr.Team Leader:Team Leader: Noli D. Macariola Noli D. Macariola
MembersMembers::Nemrod Manalo, Kit Palabrica, Edwin Montevirgen, Mila Aquino, Nemrod Manalo, Kit Palabrica, Edwin Montevirgen, Mila Aquino,
Oscar Roman, Jonathan Guevara, Fred Basa, Grace Sioting and Oscar Roman, Jonathan Guevara, Fred Basa, Grace Sioting and Victor LoVictor Lo
33
PROJECT DESCRIPTION:OAIS-PC receives about 1,500 RPs for goods and services. About 22.34% of these RPs or 335 RPs are defective (insufficient budget and outdated or obsolete specifications) and are returned to the user units. Returning RPs to user units causes procurement process to stop that results to customer dissatisfaction. To ensure that only defect free RPs are initiated by user units that would eliminate or decrease incidence of returning RPs.PROBLEM STATEMENT:RPs prepared and initiated by user units with insufficient budget and outdated or obsolete specifications are returned which delay the start of the procurement process or stop the procurement process by OAIS-PC. This in turn results to customer dissatisfaction, lost of opportunity on the user of services or goods, or delay in project implementation.
Project Title: Reduce incidence of returned Request for Purchase (RP)
DEFINE
44
DEFINE
GOAL STATEMENT:
How to work with the OAIS-PC’s clients (user units) for them to provide defect-free RP, thus reducing the number of incidence of returned RPs, improving total processing time for processing RPs to PO, and increasing customer satisfaction. The goal is to reduce the incidence of returned RPs by 50%.
Project Title: Reduce incidence of returned Request for Purchase (RP)
55
High Level Process MapDEFINE
User identifies procurement
needs Initiate RP Approve RP
OAIS-PC receives RP
Start Procurement process Initiate PO Approve PO END
START
66
Detailed Process Map for RPDEFINE
RP Initiation & Approval
OAI
S-PC
Use
r Uni
t
StartUser Unit Identifies
Procurement Needs
Preparer prepares (modifies) RP on-
line via Oracle including budget,
specs., etc.
Verifier verifies RPApprover approves
RP
More than USD25K
Head of User Unit approves RP
Director approves RP
More than USD50K
PD, User Unit, approves RP
OAIS-PC receives RP
End
NO
YES
NO
YES
Buyer reviews and checks
correctness and completeness of
RP
Defective RP – Specs. & Others
Process RP and start procurement
process
Defective RP – Insufficient Budget
Return RP to User Unit
(Insufficient budget or others)
Buyer Initiates PO
YES
NO
YES
NO
A & B
Goes thru the hierarchy of the Business Unit
Cost Center owned by other Business
Unit?
YES
NO
77
Detailed Process Map by OAFA-APDEFINE
A
Process Map (As-is) Budget Preparation for Expendable Supplies
Oth
er D
ept
OA
FA-A
PO
IST
PR
INTI
NG
OA
OD
Send memo to various dept/offices for budget requirements
Budget coordinators received copy of memo
from OAFA-AP
Prepare budget requirement for succedding year
Submit to Head,OAFA-AP
Compute AMU’s requirements for computer & non-computer
related supplies, computation as ff:
Mo. Ave Usage=12 x 1.07UC=last acq cost + 5%
Reproduction supplies computed as ff:
Mo. Ave x 12 (buffer & UC to be determined by Printing,
Incidental cost to be computed by AMU)
Send memo and list of stock items with historical data &
recommended budget requirement to OIST &
Printing.
Require OIST to submit list of printers, including model no., acquisition date, etc.
Receive budget
proposals from OIST &
Printing, including list of printers from OIST.
Receive memo from
OAOD.
Review budget proposals of MMU,
OIST & Printing. Effect the necessary
adjustment, (unit cost, quantity,
specs, desc.) Send copy of memo to Dept/Sections’
Budget Coordinators
Receive and review budget proposals from various dept/
office. Review requirement of dept/offices which often fail to use their budget allocation or late submission of
RP and subsequently adjust
them
Consolidate, classify stock & non-stock budget proposals. Create lump sum allocation for budget requirements of
other dept/offices. Coordinate closely with OAOD on foreign rates.
Consolidate dollar-based proposals and apply 10%
allowance for freight charges.
Submit to Supervisors
for review and endorsement
to Head, OAFA-AP
End
Start
Review historical data provided by MMU. Advise Sections to
prepare budget request for non-std items
Effect necessary adjustment on
MMU’s proposals
Review and consolidate budget requirements for non-std supplies with the ff: computation:
Qty=RITS +10% allowanceUC-latest acquisition+10% or Internet
Prepare list of printers, including model no. acquisition date. etc.
Submit to IT (OIST)Specialist for
approval
Submit to Head, OAFA-
AP
Review historical data of stock items provided by MMU.
Effect necessary adjustment on
MMU’s proposals
Compute cost based on PO price and 1% allowance
Submit to Head, OAIS-LM for approval
Submit to Head,OAFA-AP
88
Detailed Process Map by OAFA-FMDEFINE
B
OAFA-FM Internal Pre-RP Preparation Process Flow for Goods
Se
rvic
e P
rovid
er
Se
rvic
e P
rovid
er
Asst.
En
gin
ee
r /
SE
OA
sst.
En
gin
ee
r /
SE
O
STARTReport Parts for
Replacement
Authenticate Report
Item Available on Stock
Determine Qty. Required
Determine Tech. Specs.- On Line Item Code
- Specs from Catalogue- Specs on the Part Itself
- Specs from Internet
Estimate Price- On Line Item Code
- Internet Price- Phone Inquiry
- Catalogues / Brochures- New / Old Quotes
- Based from experience
Prepare On-Line Stock Withdrawal
FormEND
Determine Date Needed
Petty Cash Purchase
Material a Stock Item
Fill-up Internal RP Request Form
Determine Budget Charging / Sufficiency
END
Request Item Code
NO
YES
NO
NO
YES
YES
99
Detailed Process Map for RP -OIST
DEFINE
RP Initiation & Approval
OAI
S-PC
OIS
T
StartUser Unit Identifies
Procurement Needs
Preparer prepares (modifies) RP on-
line via Oracle including budget,
specs., etc.
Verifier verifies RPApprover approves
RP
More than USD50K
Head, CSU approves RP
Director approves RP
More than USD100K
PD, OIST approves RP
OAIS-PC receives RP
End
NO
YES
NO
YES
Buyer reviews and checks
correctness and completeness of
RP
Defective RP – Specs. & others
Process RP and start procurement
process
Defective RP - Insufficient Budget
Return RP to User Unit
(Insufficient budget or others)
Buyer Initiates PO
YES
NO
YES
NO
C
Cost Center owned by other Business
Unit?
Goes thru the hierarchy of the Business Unit
YES
NO
1010
Detailed Process Map for RP -OISTDEFINE
C
OIST Internal Pre-RP Preparation Process Flow
OIS
T –
Ce
ntr
al
Se
rvic
es U
nit
OIS
T –
Ce
ntr
al
Se
rvic
es U
nit
OIS
T’s
En
d-U
se
rO
IST
’s E
nd
-Use
r
START
User Unit Completes RP form- project related- re-order items
- new/additional licenses- hardware upgrade
- software needs- Contract reference
Determines Specs.- internet
- catalogues- market
intelligence
Determines Budget- previous order
- internet- market intelligence
Approve by User unit PS?
END
Submit approved RP to CSU
CSU Staff checks completeness of RP Request form
Complete RPCSU Staff
encodes request in Oracle
END
NO
YES
NO
YES
1111
Output characteristics/ Project Y Relationship
Matrix DEFINE
Output Characteristics corr
ect
just
ifica
tion f
or
sole
sourc
e a
nd
bra
nded ite
ms
corr
ect
speci
fica
tions
suffi
cient
budget
suffi
cient
need d
ate
pro
vid
ed
8 8
8 - Strong relationship
- Moderate relationship
- Weak relationship
Potential Output Measures
Defect free approved RP
1212
Critical to QualityDEFINE
Output Unit RP
Output Characteristic
(Big Y)Defect free RP
Operations Definition
Process starts from indentification of procurement needs to RP initiation to RP approval and receipt of RP by OAIS-PC in oracle
How process will be measured
The approved RP is check and review by OAIS-PC whether it is a defect free or defective.
Specification Limits
none
TargetTo reduce by 50% the number of defective approved RP, thus reducing the incident of returning RP
Defect Defective approved RP
No. of Defect Opportunities
Per Unit1 opportunity for a defect per RP issued
CTQ
Project Y (Little y) Measure
1313
1. Correct specs.2. Sufficient budget3. Sufficient need date4. Correct justification
OAIS-PCApprovedRP
1. User units identifies procurement needs2. Initiate RP3. Approver approves RP4. OAIS-PC receivesRP in oracle5. OAIS-PC (buyer)checks and reviews correctness and completeness of RP6. Return defective RP7. OAIS-PC Processdefect free RP and start procurement process.
Initiation of
Request for
Purchase
(RP)
User Units
S I P O C CTQs DEFINE
CTQsCTQsSSupplier OOutputPProcessIInput CCustomer
1414
Time LineDEFINE
Time Line
ControlAnalyze ImproveMeasureDefine
Mar - Apr Apr – May June Jul - Aug Sep
1515
Data Collection MEASUREMEASURE
Data collected from Oct 06 to 20 Apr 07
Particulars Nos. of RPs%
against Total
% against
Returned
Approved 725 100.00% -
Returned 162 22.34% 100.00%
Due to Budget 107 14.76% 66.05%
Due to Others 55 7.59% 33.95%
1616
PARETO CHART MEASUREMEASURE
Count
Perc
ent
C2Count 107 55
Percent 66.0 34.0Cum % 66.0 100.0
OthersBudget constraint
180
160
140
120
100
80
60
40
20
0
100
80
60
40
20
0
Pareto Chart of Defects
1717
PARETO CHART MEASUREMEASURE
Count
Perc
ent
C1
Count 4 3 3 3 2 2 8Percent 20 20
3217 10 9 4 3 2 2 2 2 2
321 1 5
Cum % 20 40 57 67 75 79
28
82 85 87 89 91 93 94 95 100
16 14 6 5 4
Oth
er
OAGI
OAFA
-SE
SER
D
SARD
CW
RD
RSDD
ERD
BOD
OAFA
-AP
BPM
SD
OAIS
-LM
OAFA
-FM
OIS
T
DER
180
160
140
120
100
80
60
40
20
0
100
80
60
40
20
0
Pareto Chart of User Units/ Dept - Budget & Others
1818
PARETO CHART MEASUREMEASURE
Count
Perc
ent
C3
Count 3 2 2 2 1 1 1 5Percent 21
2319 19 8 7 4 4 3 3 2 220
2 1 1 1 5Cum % 21 40 59 67
20
74 78 81 84 87 89 91 93 93 94
9
95 100
7 4 4 3
Oth
er
OGC
OAIS
-GR
OAFA
-SE
OAGI
OAFA
-AP
CW
RD
SARD
RSDD
ERD
BOD
BPM
SD
OAIS
-LM
OAFA
-FM
DER
OIS
T120
100
80
60
40
20
0
100
80
60
40
20
0
Pareto Chart of User Units - Budget Constraint
1919
PARETO CHART MEASUREMEASURE
Count
Perc
ent
C5
Count 1 1 1 2Percent 21.8 16.4 14.5 12.7 12.7
127.3 3.6 1.8 1.8 1.8 1.8 3.6
Cum % 21.8 38.2
9
52.7 65.5 78.2 85.5 89.1 90.9 92.7 94.5 96.4 100.0
8 7 7 4 2 1
Oth
er
OAFA
-SE
OAFA
-CS
CW
RD
BOD
SER
D
OAFA
-AP
OAIS
-LM
BPM
SD
OAFA
-FM
OIS
T
DER
60
50
40
30
20
10
0
100
80
60
40
20
0
Pareto Chart of User Units - Others
2020
Sigma LevelMEASUREMEASURE
Process Sigma Computations:Process Sigma Computations:
Nos. of transactionsNos. of transactions 725725
Nos. of defectsNos. of defects 162162
Calculation ResultsCalculation Results
DPMODPMO 223,448 223,448
Defects (%)Defects (%) 22.34%22.34%
Yield (%)Yield (%) 77.66%77.66%
Process Sigma LevelProcess Sigma Level 2.262.26
2121
ANALYZEANALYZE
Cause-and-Effect DiagramCause-and-Effect Diagram
DefectFree RP
Others
Procedure
Equipment/ IT Policies
Personnel
- Roles and Responsibility
- Education/Training & Familiarity
- Support from Supervisors
- Unrealistic Prioritization
- Age
- Attitude/lack of interest/motivation
- Inconsistent Policy
- AO for Asset Management& Inventory Control
- Deactivation ofSupplier
- Oracle System
- Computer
- Guidelines in returning of RP
- Monitoring/Tracking
- Number of line items per RP
- Business Unit BrandPreferences
- Outdated / obsolete/ incorrect specs.
- Insufficient budgetestimates
- Foreign Exchange
Cause and Effect Diagram
2222
DefectFree RP
Others
Procedure
Equipment/ IT Policies
Personnel
- Roles and Responsibility
- Education/Training & Familiarity
- Support from Supervisors
- Unrealistic Prioritization
- Age
- Attitude/lack of interest/motivation
- Inconsistent Policy
- AO for Asset Management& Inventory Control
- Deactivation ofSupplier
- Oracle System
- Computer
- Guidelines in returning of RP
- Monitoring/Tracking
- Number of line items per RP
- Business Unit BrandPreferences
- Outdated / obsolete/ incorrect specs.
- Insufficient budgetestimates
- Foreign Exchange
Cause and Effect Diagram
ANALYZEANALYZE
Cause-and-Effect DiagramCause-and-Effect Diagram
N
NN
N
N
NN
NN
N
N
N
C
N
C
C
C
N
2323
ANALYZEANALYZECause-and-Effect Diagram
(Control Items)
Cause-and-Effect Diagram(Control Items)
DefectFree RP
Others
Procedure Personnel
- Education/Training & Familiarityw/Oracle
- Guidelines in returning of RP
- Number of line items per RP
- Outdated / obsolete / incorrect specs.
- Insufficient budget estimates
Cause and Effect Diagram
2424
ImproveProposed Solution
Proposed Solutions
1. Early OAIS-PC Involvement – Buyer to help and guide end user in RP initiation vis-a-vis procurement procedure, policy and methodology. Buyer to assist in market information as requested by end user.
2. OAIS-PC to develop a procedure in returning RP – Buyer to advise the end-user before returning the RP.
3. RP approval hierarchy should be aligned to the PO approval hierarchy.
4. Buyer to include end user’s suggested suppliers in the RFQ.
2525
ImproveProposed Solution
Proposed Solutions
5. RP initiators should:(a) add 10% to the last acquisition cost or to the internet price in the RP
and add another 10% (indent orders) for the shipping cost.(b) update the description/specifications of the items they are requesting.(c) limit the number of items per RP to 20 items.(d) seek assistance on pricing the items with OAIS-PC prior to initiating
RP.
6. RP initiators should be given training in RP initiation on a regular basis (semi annual) or whenever a new staff is assigned to be RP initiator. Training to be conducted by OAFA-AP and OAIS-PC
2626
IMPROVEIMPROVEPiloted Solution
To be Process Map
RP Initiation & Approval
OAI
S-PC
Use
r Uni
t
StartUser Unit Identifies
Procurement Needs
Preparer prepares (modifies) RP on-
line via Oracle including budget,
specs., etc.
Verifier verifies RP.Checks sufficiency
of budget and correctness of
specs.
Approver approves RP
More than USD25K
Head of User Unit approves RP
Director approves RP
More than USD50K
PD, User Unit, approves RP
OAIS-PC receives RP
End
NO
YES
NO
YES
Buyer reviews and checks
correctness and completeness of
RP
Defective RP – Specs. & Others
Process RP and start procurement
process
Defective RP – Insufficient Budget
Return RP to User Unit
(Insufficient budget or others)
Buyer Initiates PO
YES
NO
YES
NO
A & B
Goes thru the hierarchy of the Business Unit
Cost Center owned by other Business
Unit?
YES
NO
End-user to request OAIS-PC for assistance /
Early Procurement Involvement
Buyer informs End-user of the
defective RP
2727
IMPROVEIMPROVE
Approval HierarchyApproval Hierarchy
Value Band
RP Approval Hierarchy PO Approval Hierarchy
OIST ALL Business Units
of OAS
OAIS-PC
US$25,000 and below Head, Central Services Head, Business Unit Head, OAIS-PC
US$25,001 to US$50,000 Head, Central Services Director, OAFA/OAIS Head, OAIS-PC
US$50,001 to US$100,000 PD, OIST PD, OAS Director, OAIS
Above US$100,000 PD, OIST PD, OAS PD, OAS
Value Band
RP Approval Hierarchy PO Approval Hierarchy
OIST ALL ROLL OUT UNITS of ADB
OAIS-PC
US$25,000 and below Head, Central Services Head, Business Unit Head, OAIS-PC
US$25,001 to US$50,000 Head, Central Services Head, Business Unit Head, OAIS-PC
US$50,001 to US$100,000 PD, OIST Director, OAFA/OAIS Director, OAIS
Above US$100,000 PD, OIST PD, OAS PD, OAS
As is Approval Hierarchy
Proposed Approval Hierarchy
2828
IMPROVEIMPROVEProposed Solution
Control Factor Critical Issues, (C) Proposed Solution Owner Status
A. PersonnelA. Personnel Education/Training & Education/Training & Familiarity with OracleFamiliarity with Oracle
- Conduct Training for end-users on a regular Conduct Training for end-users on a regular basis (semi-annual)basis (semi-annual)
- Early OAIS-PC InvolvementEarly OAIS-PC Involvement
- Buyer to include end user’s suggested supplier Buyer to include end user’s suggested supplier in sending the RFQin sending the RFQ
OAFA-AP and OAIS-PCOAFA-AP and OAIS-PC
RP initiators / OAIS-PC RP initiators / OAIS-PC
BuyerBuyer
By end of 2007By end of 2007
On going / On going / implementedimplemented
On goingOn going
B. ProcedureB. Procedure No procedure in No procedure in returning RPreturning RP
Limit number of line Limit number of line items per RPitems per RP
- Develop a procedure in returning RPDevelop a procedure in returning RP
- Align RP approval hierarchy with OAIS-PC - Align RP approval hierarchy with OAIS-PC PO approval hierarchyPO approval hierarchy
- RP initiators should limit the number of line - RP initiators should limit the number of line items per RP to 20.items per RP to 20.
OAIS-PCOAIS-PC
OAFA-APOAFA-AP
End-userEnd-user
On going On going
Included in the Included in the AO revisionAO revision
On goingOn going
C. OthersC. Others Outdated / obsolete or Outdated / obsolete or incorrect specificationsincorrect specifications
- RP initiators should update / indicate correct - RP initiators should update / indicate correct specifications and description of items being specifications and description of items being requested.requested.
End-userEnd-user On going On going
Insufficient budget Insufficient budget estimatesestimates
- Add 10% to the last acquisition cost or to the Add 10% to the last acquisition cost or to the internet price in the RP to cover possible inflation internet price in the RP to cover possible inflation cost and add another 10% (indent orders) for the cost and add another 10% (indent orders) for the shipping cost.shipping cost.
- End-user may seek assistance on the pricing End-user may seek assistance on the pricing with OAIS-PC prior to the initiation of RP.with OAIS-PC prior to the initiation of RP.
End-userEnd-user
End-userEnd-user
On going On going
On goingOn going
2929
IMPROVEIMPROVEFAILURE MODE and EFFECT
ANALYSIS (FMEA)
Potential Failure Mode and Effects AnalysisPotential Failure Mode and Effects Analysis(Process FMEA)(Process FMEA)
Item / Item / ProcessProcess
Potential Potential Failure Failure ModeMode
Potential Potential Effect(s) Effect(s) of Failureof Failure
Potential Potential Causes of Causes of
FailureFailure
Current Current Process Process ControlControl
Recommended Recommended Action(s)Action(s)
Responsibility Responsibility & target & target
Completion Completion DateDate
Action ResultsAction Results
SE
VS
EV
PR
OB
PR
OB
DE
TD
ET
RP
NR
PN
Actions Actions takentaken
New
N
ew
SE
VS
EV
New
N
ew
OC
CO
CC
New
N
ew
DE
TD
ET
New
N
ew
RP
NR
PN
Approved RP Approved RP with Correct with Correct SpecificationsSpecifications
RP not RP not processprocess
Returned Returned RPRP
66 Wrong Wrong SpecificationsSpecifications
22 NoneNone 33 3636 1. Initiator should 1. Initiator should ensure correct ensure correct specifications are specifications are indicated in the indicated in the RPRP2. Approver to 2. Approver to check check specifications specifications before approving before approving RPRP
End – userEnd – user RP initiator & RP initiator & approverapprover
Added to Added to the the processprocess
66 11 22 1212
Approved RP Approved RP with Correct with Correct estimated estimated costcost
RP not RP not processprocess
Returned Returned RPRP
66 Estimated Estimated cost not cost not sufficientsufficient
33 NoneNone 44 7272 1. Initiator should 1. Initiator should ensure adequate ensure adequate estimated costs estimated costs are indicated in are indicated in the RP by the RP by providing providing sufficient sufficient allowance in allowance in costing.costing.2. Approver to 2. Approver to check estimated check estimated costs before costs before approving RPapproving RP
End – userEnd – user RP initiator & RP initiator & approverapprover
Added to Added to the the processprocess
66 22 33 3636
SEV – SeverityPROB/OCC – probability of occurrenceDET – DetectionRPN – Review Risk Priority Numbers: prioritize item that requires additional quality planning or actions
3030
Improved Sigma LevelIMPROVEIMPROVE
Process Sigma Computations:Process Sigma Computations:
Nos. of transactionsNos. of transactions 8888
Nos. of defectsNos. of defects 1212
Calculation ResultsCalculation Results
DPMODPMO 136,364 136,364
Defects (%)Defects (%) 13.64%13.64%
Yield (%)Yield (%) 86.36%86.36%
Process Sigma LevelProcess Sigma Level 2.602.60
3131
PARETO CHART MEASUREMEASURE
Count
Perc
ent
REASONSCount 10 2
Percent 83.3 16.7Cum % 83.3 100.0
Specs.Budget
12
10
8
6
4
2
0
100
80
60
40
20
0
Pareto Chart of REASONS
3232
PARETO CHART MEASUREMEASURE
Count
Perc
ent
OFC/DEPTCount
33.3 25.0 8.3 8.3 8.3 8.3 8.3Cum % 33.3 58.3
4
66.7 75.0 83.3 91.7 100.0
3 1 1 1 1 1Percent
SELMEARDDERCBOISTFM
12
10
8
6
4
2
0
100
80
60
40
20
0
Pareto Chart of OFC/ DEPT
3333
Comparison of Sigma LevelsIMPROVEIMPROVE
Process Sigma ComputationsProcess Sigma Computations
Previous Improved Difference
Nos. of Transactions 725 88
Nos. of Defects 162 12
Calculations Results
DPMO 223,448 136,364 (87,084)
Defects (%) 22% 13.64% -8.70%
Yield (%) 78% 86.36% 8.70%
Process Sigma Level 2.26 2.60 0.34
3434
ControlRisk Assessment MatrixRisk Assessment Matrix
Risk Assessment MatrixRisk Assessment Matrix
Control FactorControl Factor Critical IssuesCritical Issues Proposed SolutionProposed Solution RiskRisk RemarksRemarks
A. PersonnelA. Personnel 1. Education / Training 1. Education / Training & Familiarity with & Familiarity with OracleOracle
Conduct regular training to all RP initiatorsConduct regular training to all RP initiators
No RiskNo Risk
Most of RP initiators claimed that they Most of RP initiators claimed that they do not receive formal training in RP do not receive formal training in RP initiation. OAFA-AP and OAIS-PC will initiation. OAFA-AP and OAIS-PC will conduct training in RP initiation.conduct training in RP initiation.
- Early Procurement Involvement- Early Procurement Involvement- Buyer to include end user’s recommended Buyer to include end user’s recommended supplier in sending the RFQsupplier in sending the RFQ- Re-visit procedure in returning RP and RP Re-visit procedure in returning RP and RP approval hierarchy approval hierarchy
No RiskNo Risk
To guide and help end-user in initiating To guide and help end-user in initiating complete and correct RP (correct complete and correct RP (correct justifications, specs., estimates, etc.)justifications, specs., estimates, etc.)
B. Procedure / B. Procedure / PolicyPolicy
Guidelines for Pre-Guidelines for Pre-initiation of RP.initiation of RP.
End-user to provide guidelines in the pre-initiation End-user to provide guidelines in the pre-initiation of RP. OAIS-PC to help in the providing of RP. OAIS-PC to help in the providing guidelines.guidelines.
No RiskNo RiskThis will eliminate errors in initiating RP This will eliminate errors in initiating RP in oracle.in oracle.
Limit number of line Limit number of line items per RPitems per RP
RP initiators should limit the number of line items RP initiators should limit the number of line items per RP to 20.per RP to 20. No RiskNo Risk
RPs with more line items are prone to RPs with more line items are prone to mistakes and errors. mistakes and errors.
Risk Risk Identification:Identification:
High RiskHigh Risk - is one in which issues exist that are beyond team's control, there is no plan for resolution or has a low probability of successful resolution. - is one in which issues exist that are beyond team's control, there is no plan for resolution or has a low probability of successful resolution.
Low RiskLow Risk - is one in which issues exist that are within team's control, has a plan for resolution and has a high probability of successful resolution. - is one in which issues exist that are within team's control, has a plan for resolution and has a high probability of successful resolution.
No RiskNo Risk - is considered to have either no risk or even though there is an issue, experience indicates that it can be solved within the normal course of design. - is considered to have either no risk or even though there is an issue, experience indicates that it can be solved within the normal course of design.
3535
Control Mistake ProofingMistake Proofing
Reduce incidence of returned
Request for Purchase (RP)
User-Unit OAIS-PC Supplier Timing Mistake Proofing
ImplementationStatus
11 RP initiators to check carefully the specifications of item/s requested and adequate allowance is provided in the estimated cost of the item.
The number of items per RP shall be limited to 20 items.
X
Every time RP is initiated
The first approver should check the specifications, estimated cost of the item/s requested and the number of items per RP (max of 20 items per RP). Please see checklist in the following slide
On-going
3636
Control Control SheetControl Sheet
Proposed Solution Effective Date Timing Responsibility
11 Early OAIS-PC Involvement Jul 07 (implemented) Every time there is a request from user unit.
OAIS-PC (NOs)
22 OAIS-PC to develop a procedure in returning RP
Sep 07 (implemented) Every time RP is returned
OAIS-PC
33 RP approval hierarchy should be aligned to the PO approval hierarchy.
As soon as the AO for OAFA-AP is approved
Every time RP is initiated it will go thru the hierarchy
OAFA-APMs. Miles Aquino
44 Buyer to include end user’s suggested suppliers in the RFQ.
Aug 07 (implemented) Every time an RFQ or RFP is made, as applicable
OAIS-PC (Buyers)
3737
Control Control SheetControl Sheet
Proposed Solution Effective Date Timing Responsibility
55 RP initiators should:(a) Add 10% to the last acquisition cost or to the internet price in the RP and add another 10% (indent orders) for the shipping cost.
(b) Update description / specifications of the items they are requesting as applicable.
(c) Limit the number of line items per RP to 20.
(d) End-user may seek assistance on the pricing with OAIS-PC prior to the initiation of RP.
Aug 07 (implemented) As applicable User unit
66 Training for the End-user on a regular basis (semi-annual)
Before the end of 2007 Every six months there after
OAFA-AP and OAIS-PC
3838
Control Stakeholder AnalysisStakeholder Analysis
STAKEHOLDER ANALYSIS FOR REDUCTION OF INCIDENT ON RETURNED RP
Reduce the Incident of Returned Request for Purchase (RP)
Stakeholders Attitude Influence Actions
Estimate Confidence Estimate Confidence
1. RP Preparer ++ √ M √ Involved as co-researchers and co-actors
2. RP Approver ++ √ H √ Direct participation
3. Buyer ++ √ M √ Involved as co-researchers and co-actors
4. PO Approver ++ √ H √ Directly involved in decision-making
5. OAS Management
++ √ H √ Directly involved in decision-making
5 Category Code of Stakeholder's Attitude from Supportive to Opposed (Column 2)
++ Strongly in favor
+ Weakly in favor
O Indifferent or undecided
- Weakly opposed
- - Strongly opposed
Confidence regarding estimate in Column 2
√ Fully confident
? Reasonably confident
?? An Informed guess
??? Wild guess
3 Category Code of Stakeholder's Influence
H High; a person or group has power of veto, formally or informally
M Medium; could probably achieve the goals against the person's or group's opposition, but not easily
L Low; a person or group can do little to influence the outcomes of the intended actions
3939
Control Financial SavingsFinancial Savings
SOFT SAVINGSReduction on incident of returned Purchase Requisition (RP)
I. Hard Savings – None
II. Soft Savings: US$5,242.32
1. Reduction in Transaction Cost:– A 50% reduction on incident of returned Purchase Requisition (RP) will free up end users’ time in re-doing RPs, which would result reduction in usage costs (i.e. amount of time on computer system, use of electricity, etc.). This will result in a saving of US$2,621.16 for one year (please see next slide for the computation).
2. Avoidance of Capacity Enhancement or Increase Efficiency:– Mitigating or eliminating the incident of returning the RP can free up staff of repeating the process of creating/re-doing an RP. This can create opportunity for them to attend on other important work to improve productivity. Reducing the incident of returned RP by 50% will collectively free up 108 hours of the RP initiators and approvers’ time for a year which could be used to attend to more strategic endeavors. This efficiency will translate to an additional savings of US$2,621.16 per year.
3. Increase Customer Satisfaction: – Returning RP is considered as one of the bottlenecks in timely processing of PO. Reducing or minimizing this bottleneck will result in a timely processing of POs which in turn lead to a timely delivery of Goods and Services. This will provide the end user with the opportunity to maximize utilization of the said Goods or Services which will result in increase customer satisfaction.
4040
Control Financial SavingsFinancial Savings
Cost Analysis for Transaction Cost
Under Normal Process
(A)
Under Six Sigma (50%
reduction)(B)
Savings(A-B)
Staff Level *Annual Salary Matrix of SS (Php)
US Dollar Equivalent
*Annual Salary
Matrix of PS
L4 548,645.00 $11,748.29 $112,300.00
A Total number of RPs returned for 6 months 162 81 L5 642,775.00 $13,763.92 $126,600.00
B Cost of preparing RPs $16.18 $16.18 L6 763,870.00 $16,356.96 $143,700.00
C Total cost of returned RPs $2,621.16 $1,310.58 L7 919,650.00 $19,692.72 $160,500.00
D Total Savings for 6 months $1,310.58 L8 1,120,050.00 $23,983.94 $178,300.00
E Total Savings for 12 months $2,621.16 L9 1,377,850.00 $29,504.28 $201,400.00
Data: Time Value 9A 1,678,500.00 $35,942.18 -
i. Average time to prepare RP 30 minutes $3.90 9A2 2,081,345.00 $44,568.42 -
ii. Average time to review/approve RP 10 minutes $12.28 Total 9,132,685.00 $195,560.71 $922,800.00
iii. Total number of ADB working days per year 261 Average 1,141,585.63 $24,445.09 $153,800.00
iv. Cost of preparing RP $16.18 Daily Rate 4,373.89 $93.66 $589.27
Hourly
Rate 546.74 $11.71 $73.66
* Taken form 2006 Salary Matrix of BPHR
4141
Control Financial SavingsFinancial Savings
ParticularsUnder
Normal Process
Six Sigma Process
(50% reduction)
Time Rate
A. RPs returned in 6 months 162 81
B. RPs returned in one year 324 162
C. Average time to prepare RP (minutes) 30 $ 3.90
D. Average time to review/approve RP (minutes)
10 $ 12.28
E. Average time to prepare, review and approve RP (minutes)
40 $ 16.18
F. Total number of minutes per year 6,480 $ 2,621.16
G. Equivalent in hours per year 108
H. Rate per hour $ 24.27
SAVINGS per year $ 2,621.16
Cost Analysis for Avoidance of Capacity Enhancement or Increase Efficiency
4242
Control Checklist for RP verifierChecklist for RP verifier
Checklist in verifying RPs
Verifier to check the following:
• Estimated unit price per line item (should be sufficient to cover forex fluctuation, inflation and shipping cost);
• Budget account number charging code;
• Specifications, must be updated;
• Description, complete and correct;
• Line item type should be the same as line item category;
• Justification, if branded or sole source;
• Note to buyer, if any
4343
Control Guidelines in Returning RP
Guidelines in Returning RP
Salient Points in the Guidelines in Returning Request for Purchase (RP)
1. The Buyer must notify via email and follow via phone the end user or RP preparer that there is a substantial change to be made to the RP;
2. Response time by end user or RP preparer: 2 days (If no response in 2 days, the buyer will return the RP);
3. For multiple line items, the Buyer should prepare the PO for items within the allocated budget and/or with complete specifications before returning the RP;
4. Buyer to check notification regularly;
5. Follow-up should be done to confirm whether the RP will be amended or will be cancelled.
4444
END OF PRESENTATION