General Summary of Process The process to be assessed is the in-country accounts payable process for a real estate department of a global company’s operations. The process involves receiving invoices from 3rdparty vendors, entering the particulars into the required systems, performing necessary checks that the invoice is valid & submitting required documentation to the finance department to effect payment. There are a few more aspects to be explained to provide context. The global company concerned is Motorola Solutions Pty Ltd (Motorola hereafter). Motorola outsources their global real estate solution to CBRE GWS Pty Ltd (CBRE hereafter). CBREemploys all real estate department staff below regional executive level to Motorola. The accounts payable process is entirely delivered & managed by CBRE staff; however certain outputs must be compatible with flow-onCBRE or Motorola systems – which mean many of the templates & systems used are beyond in-country’s control. The Business Imperatives The business imperative for CBRE is to profitably prevent interruption to Motorola’s work environments. Typical interruptions are: power loss, lock-outs due to security equipment failure, loss of IT connection, unexpected activation of fire alarm systems, and general low or non-performance of 3rd party vendor that impedes office activities (no cleaners, no lift mechanics, etc). 3rd party vendors refusing to work due to outstanding debts between CBRE and the 3rd party vendor is a possible interruption. The possibility is remote &easily controlled via theaccounts payable process. To profitably service Motorola, CBRE must submit to Motorola invoices on a timely basis. The contract between CBRE & Motorola does not set a given time limit when CBRE must invoice Motorola – however to keep a profitable (or at least healthy) trade working capital position CBRE invoices Motorola promptly. CBRE pays 3rdparty vendors in 60 days while Motorola pays CBRE in 45 days. Accounts Payable data becomes Accounts Receivable& so prompt, accurate processing of Accounts Payable improves CBRE’s financial position. Current Operations Strategy Objectives Enable CBRE to bill Motorola for services rendered accurately & profitably Prevent outstanding debt to creditors that might interrupt CBRE’s services to Motorola Reduce time needed to process invoices Prevent overpayment to 3rd party vendors Inform Motorola of accrued debt to CBRE (&3rdparty vendors) The Process The Process in Detail 1 – Invoice received from 3rd party vendorto unique email address 2 – Invoice is stored electronically in file server byShared AdminFacility Admin– 1 minutes per invoice 3 – Delay until FacilityShared AdminAdminworkloads allows &sufficient number of invoices is receivedto begin processing a batch of invoices - 2 to 4 business days 4 – FacilityShared Admin reviews procedural aspects of each invoice in the batch confirming all required clerical details for processing are present – 3 minutes per invoice 5- FacilityShared Admin decides whether to return each invoice to 3rd party vendor where unpayable due to clerical issue –1.5% of invoices are returned 6 – Shared Admin delays until 5 invoices ready for next step – we’ll call a ‘Country Batch’ 67-FacilityShared Admin emailsAdmin puts invoices in Facility Coordinator’s Country Batch in-tray for substantive review 87-Delay until Facility Coordinator workloads allows & sufficient number of invoices is receivedto begin processing a batch of invoices – 1 to 2 business days 98-Facility Coordinator reviews substantive aspects of invoice confirming invoice is payable – 2 minutes per invoice 109-Facility Coordinator decides whether to return invoice to 3rd party vendor where unpayable due to substantive issue – 0.7% of invoices are returned 110-Facility Coordinator emails Country Batch to Shared Adminreturns the batch of invoices to Facility Admin for further processing 121-SharedFacility Admin inserts details of invoice into Purchases Tracker document – 3 minutes per invoice 12-FacilityShared Admin inserts details of invoice & copy of invoice into Document Log – 3 minutes per invoice 13-SharedFacility Admin stores Document Log on file server – 1 minute per invoice 14-Document Log is output of process 15-Document Log emailed to Facility Manager for approval – 3 minutes per email 16-Delay until Facility Manager approves Document Log - 1 to 2 business days 17-Facility Manager decides whether to approve Document Log or return to Facility Coordinatoror Shared Admin for correction – 20 minutes per email& 0.2% of Document Logs are returned 18-Approved Document Logs are emailed by Facility Manager to Shared Services Centre& Shared Admin to effect payment – 1 minute per email 19-Shared Service Centre decides whether to effect payment or returns Document Log to Shared AdminFacility Manager for further corrections – 0.5% of Document Logs returned (any issue with any invoice in a Document Log causes the batch to be returned to Facility Manager) 20-Shared Service Centre outputs payment to provider Lean Value Changes: 1 Shared Admin (possible multiple people) will be at lower cost point on Salary (working on % difference- will update) 2 Country Batch is smaller batch of invoices (5) for Facility Coordinator’s review than previous (approx 10) 3 Document Log contains 2 or more Country Batches (smaller batches, more efficiency & detailed-attentiveness) 4 Working on a Signal approach ‘Shared Admin’ will not seek FC’s approval until last batch approved,etc Any other LEAN applications you can think of, just let me know. Categorize the Process The process is a batch work process. CBRE processes a medium to high volume of AP invoices with low levels of variety between invoices, because incompatible invoices are rejected. The processing of each invoice is standardized by application of specialized skills in stages. Volume of Invoices In 2016, 821 invoices were processed and 59 Document Logs (or batches of invoices) were submitted for processing. On average that means 68.4 invoices were processed per calendar month & 4.9 Document Logs per month & 13.9 invoices per Document Log. Identify the Current Process’ Performance The level of operation of the Account Payable process is acceptable. CBRE have never suffered a situation where the business imperatives were jeopardized; 3rd party vendors have never refused to serve CBRE/Motorola, CBRE is profitable on the Motorola account & in 11 of 12 month’s CBRE achieves a favorable trade working capital position. The performance is further described andexplored using Slack’s three levels of operations performance: Performance Objectives – Operational Level Quality – 2.9% of invoices or Document Logs experience back-flows. This is an acceptable ratio of return which can feasibly be improved. There are no immediate plans to improve beyond increasing experience of team members & continuing to inform 3rdparty vendors how to submit correct invoices. Speed – Each invoice requires a combined processing time of 37 minutes by three staff members in-country. Each invoice experiences an average of 6 days of delays. Reducing the delays has been explored & deemed not necessary as these delays are shortened where context requires (end of financial reporting period for example). Dependability – Document Logs are moderately time-sensitive. Each month there is a ‘sweep’ by Shared Service Centre when they turn AP debt (Document Logs) into Accounts Receivable billable invoices. This typically occurs on the 18th of the calendar month. Historically there have been no issues submitting a sufficient number of Document Logs before the sweep to bill Motorola each month. The operation of overlapping payment terms (CBRE pays out in 60 days &is paid in 45 days) is favourable&buffers issues where one Document Logs misses the sweep. Flexibility – The process is not flexible. It requires standard inputs & rejects incompatible variants. This is largely due to aspects externally controlled. We have requested the Document Log template be altered&our request has been denied. The clerical aspects that must appear on 3rdparty vendor invoices cannot be changed (but aren’t unique to CBRE as a large organization). The flexibility available is thepriority to a given batch in context of financial deadlines (shifting workload to meet deadlines) &the team members’ knowledge & abilities coverage meaning during one’s absence (either short or long term) Document Logs can continue to be produced, screened & submitted. This speaks to the flexibility of the aspects controlled in-country& the inflexibility of the external country requirements. Cost – The cost is not an area this exercise is focusing on, primarily because cost assessment would explore confidential matters like salaries for team members. The cost ‘in labour’ is acceptable to CBRE& Motorola; it would be a welcome area of improvement. Performance Objectives – Strategic Level Risk & Resilience – The risks of service interruption, trading not-profitably & overpaying 3rd party vendors are addressed adequately. The resilience of the process is evidenced by overlapping knowledge & ability by the team members to cover in times of absence to ensure the Document Logs can continue to be fully processed. Capital utilization – Not overly relevant to this process. The computers & other capital resources required are very low in cost. Service & Revenue – Not overly relevant to this process. Service achieved causes no complaints & Revenue is addressed without issue. Efficiency & Cost – Cost will not be explored in this exercise for confidentiality reasons. Efficiency is an area of welcome improvement. Capability for Innovation – Innovation in the Accounts Payable process is a constant stretch target. We have preliminarily explored a system of automated AP processing that would replace manual data entry – however due to the unchangeable compatibility issues the exploration was abandoned. We have improved the tools& methods used by the various staff members in the last 24 months to increase efficiency noticeably. Performance Objectives – Societal Level Planet – Not a driving force of the process. As a side benefit we shifted to a paperless process in the last 24 months reducing our environmental footprint. People – Not overly relevant. The process involves clerical work which is unlikely to add to employee satisfaction, but is standard for AP processing. Economic – The major driving force for the process. The process exists to realize payments to CBRE from Motorola & make payments from CBRE to 3rd party vendors who service Motorola. Performance Objectives Summary The Accounts Payable process meets the demands & operating parameters required by CBRE & Motorola. 3rd party vendor invoices are processed fast enough, often enough, accurately enough & profitably to prevent interruption to Motorola. To review the Current Operations Strategy Objectives Enable CBRE to bill Motorola for services rendered accurately & profitably - Achieved Prevent outstanding debt to creditors that might interrupt CBRE’s services to Motorola - Achieved Reduce time needed to process invoices – Achieved with room for improvement(shorten delays, minimize back-flows, reduce time commitment required – work in continuous improvement) Prevent overpayment to 3rd party vendors - Achieved Inform Motorola of accrued debt to CBRE (& 3rd party vendors)- Achieved Design of Process The Account Payable process is a multiple-stakeholder-designed process. It has been subject to a few instances of redesigning over the years. As noted, the process is not unilaterally controlled byin-country by CBRE. The process is the product of different (and evolving)stakeholders rather than a single, cohesive entity.Let’s look at the stakeholders & note which can control aspects of the process. Stakeholders In-country CBRE Team – controls day-to-day processing& tools used, controlsfrom who & when to purchase services, controls methods of delivering compatible outputs MotorolaAustralia (Local Client) – controls format in which financial data is input to it & calendar when it invoices & accruals are to be submitted CBRE External Country (Shared Service Centre) – controls format Document Logs must be submitted, controls how 3rdparty vendor invoices must display information & controls CBRE’s AP & AR calendars Motorola Global (Global client) – controls number and composition of the in-country team, controls Motorola’s AP & AR calendars 3rd Party Vendors – offers services for purchase to CBRE &submits invoices to in-country team per instructions CBRE Australia – interested in retaining satisfied client, profits & reputation These aspects have been re-designedin-country: Human Resources: Facility Admin role exists to complete assorted clerical tasks required by the business unit. The headcount was previously a 2nd Receptionist. Following a new instruction from in-country Facility Manager the role evolved into a back-of-house admin role. One of the principle clerical tasks the Facility Admin role fulfills is the AP processing. In years past there was no Facility Admin role, all Admin was carried by the Facility Coordinator – which jeopardized business imperatives occasionally. Tools used in AP Processing: The in-country AP process must result in a principle, standard out: the Document Log’s submission to SSC. All tools used in the receipt, confirmation, recording & approval of the invoices that form the Document Log are subject to in-country control. In 2015 a 6-month exercise was undertaken to redesign the tools used in AP processing. 1- An email address was setup to receive all invoices; invoices were no longer to be posted to CBRE, manually stored, manually tracked & processed. 2- The process became an electronic activity. a. Physical/Paperwork tasks changed to electronic tasks (storage of invoices received, collating invoices & signing approved Document Logs), b. integrating existing electronic tools (merging purchase order & invoice receipt tracking document as well as merging disparate, related debt trackers into one document). 3- Reducing/concentrating the data entry each invoice required into a single dataentry burst that can be cut& paste replicated into required, mirroring documents – even the Document Log. The efficiency of the tasks controlled by in-country team was greatly increased through a redesign. Number of Parties submitting Invoices: In 2015 a consolidation of 3rdparty vendors was undertaken. CBRE reduced from 45 to 23 3rdparty vendors for Motorola. The overall drop in 3rdparty vendors enabled greater time to guide ‘how to’ submit clerically compliant 3rdparty vendor invoices – meaning fewer invoices were return to sender. Overall number of invoices nearly halved. 108 Document Logs were submitted in 2015 containing 1263 invoices. In 2016 we had 59 Document Logs and 821 invoices. That’s a 45% drop in Document Logs submitted and 35% drop in invoices submitted. This reduction is not just achieved through reduction of vendors but reducing the number of vendor invoices. Preferences changed from vendors submitting monthly invoices to vendors submitting quarterly or greater invoices. Design Conclusion The process is designed& has been redesigned at suitable intervals. The AP process co-exists with client processes andhigher priority processes and is partially designed by these ‘shared space’ processes as well. Conclusion of Exercise CBRE’s Account Payable process meets the operating parameters &sufficiently optimizes the resources consumed by doing so within the bounds of control granted. The business imperative of profitably avoiding interruption to Motorola’s office space is achieved with room for improvement in the efficiency of resources consumed. In future we can expect Motorola to seek a reduction of CBRE’s in-country team headcount – either a full headcount or part thereof. CBRE’s response will be led by the exact request, rather than hypotheticals, however in basic terms the answer will involved shifting the Facility Admin’s AP tasks outside Australia to achieve a lower cost base. Current activities surrounding operations management Identify the operation’s current performance Identify the current operations strategy How the process was designed (or not) What order winners and order qualifiers can we bring in?