University of Groningen
Faculty of Management & Organisation:
Master Operations & Supply Chains Management
October 2006
Deli XL
PERFORMANCE SCANNING OF DELI XL ZWOLLE
Author: André Fleer
Email: a.a.fleer@student.rug.nl, aafleer@hotmail.com Telephone: 06-22761337 Student number: s1512587 Date: 01-10-2006 Company: Deli XL Zwolle Boerendanserdijk 47 8024AE Zwolle Tel: 038 4554060
Supervisor: Mr. B. van Nieuwenhuijzen
Education:
University of Groningen
Faculty of Management and Organisation
Master: Business Administration Operations & Supply Chains
Landleven 5
9747 AD Groningen
PREFACE
This report gives an outline of the master thesis project, which I have performed for Deli XL Zwolle. The master thesis is a part of the master Operations & Supply Chains at the University of Groningen.
During my final thesis I have worked on a project, whit the goal to perform a performance scan at Deli XL Zwolle and to provide some advice for improvements in the processes of Deli XL Zwolle. This has to result in savings and a better customer service.
I would like to thank Mr. Boudewijn van Nieuwenhuijzen for giving me the opportunity to do my master thesis at Deli XL Zwolle and for helping me making this report. Furthermore the
employees of Deli XL have made a great contribution to my research. They provided me with the necessary information and helped me whenever help was needed.
Also many thanks to dr. Van der Vaart, who gave me the support from the University of Groningen.
Zwolle, October 2006
SUMMARY
In this research a performance scan which is developed by the University of Groningen has been applied on an establishment in Zwolle of the Dutch food wholesaler Deli XL. The so called “Groningen Manufacturing Scan” consists out of 4 steps. It measures current performance of Deli XL Zwolle with the help of performance indicators. Current performance was compared with customer requirements and in this way performance gaps were discovered. In stage 2 it was analyzed which current processes are responsible for the performance gaps. In step 3 these processes are analyzed more extensively. With the help of Actor Activity Diagrams (Schaap, 2000) a representation of the relevant processes is showed. Problems in these processes are discussed. In stage 4 extra operational problems are discussed. When current performance of the company has been mapped, several solutions and widely known techniques are handed which should lead to a more controllable business process.
Index
Preface...1
Summary...2
Introduction ...4
1. Company profile Deli XL ...5
2. Conceptual Outline...8 2.1 Problem definition ...8 2.2 Objective ...9 2.3 Research question ...9 2.4 Sub-questions ...10 2.5 Research constraints ...14 2.6 Theory used ...15
3. Stage 1: Objectives and performance...16
3.1 Market ...16
3.2 Market analysis (Platts Gregory Procedure) ...21
3.3 Performance Indicators ...26
3.3.1 Quality ...26
3.3.2 Delivery ...29
3.4 Conclusion stage 1...39
4. Stage 2: Identification of relevant processes ...41
5. Stage 3: Operational Problems in Relevant Processes ...61
6. Stage 4: Extra causes for performance gaps...70
7. Suggestions for improvements...74
Appendix A: Examples of performance indicators in a service oriented company (Schönsleben, 2004; Slack and Lewis, 2002)...85
Appendix B: Questionnaire customer needs...87
Appendix C: results of questionaire positions ...91
Appendix D: results of questionaire questions...92
Appendix E: Results of extensive customer satisfaction research...93
Appendix F: Explanation of used theory ...95
INTRODUCTION
This report is the output of the master thesis project for the master Business Administration Operations & Supply Chains at the University of Groningen.
The project consist out of two parts; the first part is to carry out a process analysis for Deli XL Zwolle and the second part, is to provide advice for improvements based on the outcomes of the analysis.
In this report a brief description of the Deli XL Group can be found. After that the conceptual outline is described. In this conceptual outline the project definition as well as the scope of the project is discussed comprehensively. Afterwards the process analysis will be described. The analysis consists out of 4 stages which are described in the chapters 3 - 6.
1. COMPANY PROFILE DELI XL
Mission
"We truly strive to be the best performing supplier in foodservice distribution, supported by
passionately committed employees."
Vision
The hospitality market requires a professional operator providing an indispensable link in the chain connecting an attractive offering to an effective, well-managed food preparation and serving process. With a vigilant eye trained on customer needs, a smooth running distribution process and passionately dedicated employees, Deli XL provides an unbeatable offering. This has allowed Deli XL to become and remain the company that sets the pace for the market, clearly differentiated from its competitors and the strongest in the market.
History
The foodservice wholesaler Deli XL was founded in 1999 when Groot Verbruik Ahold (GVA) and
Gastronoom were merged. These two companies were created in the early eigthies. In 1982
Gastronoom was founded when “Klaver Grootverbruik” and “De Gastronoom” were put together. GVA was created when Ahold took over “Kok – Ede grootverbruik”, “Instel Services” and
“Horeca Inkoopcentrale” and merged these companies in 1985.
Deli stands for delivery but also for delicatessen, delicious, delicieux which all indicate special and tasteful food products. Furthermore the word deli sounds like daily. To summarize Deli XL stands for daily delivery of delicious products in XL size.
In October 2000 Deli XL assimilate the Belgian company Mea-DeWilde – De Loore. This
company went further under the name Deli XL België. This buy created attractive possibilities to grow in Belgium.
foodservice product division she operates beside Deli XL under the following names: 3663 First for foodservice (United Kingdom), Bidvest First for foodservice (Australia), Crean First for foodservice (New Zealand), Caterplus (South Africa) and Combined Foods (South Africa).
Organization
Deli XL consists of two independent business units; Deli XL Holland and Deli XL Belgium. From now on Deli XL Belgium stays out of consideration.
The Deli XL Holland business unit has 1 central distributional centre located at Ede, 12 locations serving the café, hotel and restaurant trades, 1 nation-wide chilled products centre also located at Ede, 4 regional fresh produce centres and 3 franchisees. Deli XL Zwolle is one of the 12 locations which are serving the café, hotel and restaurants trades. In picture 1 all locations of Deli XL are showed. Spread over these locations about 2000 employees are working for Deli XL Holland.
Deli XL Zwolle
Headquarter Ede
Figure 1: Deli XL locations
Market
Deli XL holds an estimated 13% share of the Dutch foodservice market and an estimated 4% share of the market in Belgium. It is also a leading provider of food products to the institutional market in Luxembourg.
• Canteens/contract catering facilities • Multi-unit "chain" restaurants
• Medium and small café, hotel and restaurant establishments • Schools and other educational establishments
• The "hybrid" segment of the market: gas and other transportation locations, stores In these markets they have approximately 30k customers, among which hospitals, nursing homes, company restaurants, restaurants, hotels, cafeteria, fast-food, zoos, topic parks, bungalow parks, congress centres, petrol stations, freedom shops, etc.
They can deliver a total assortment of approximately 60k articles which are subdivided in to fresh food, grocery products, freeze products and non-food articles.
Besides this Deli XL also offers some additional services to their customers; • Deli XL Academy; courses and training for the staff of our customers, • Bestel XL: on line ordering system 1
• 'Binnen!'; a retail concept for the institutional and the canteen hospitality markets. • Retail concepts: these include fresh/convenience concepts, wine, economy and private
label
• Magazines:
food & focus
Actie & Voordeel Grootverbruik - for the wholesaler
Actie & Voordeel Horeca for the café, hotel and restaurant trades Various direct marketing publications
2. CONCEPTUAL OUTLINE
The conceptual outline of this research design is based on a research model developed by De Leeuw (2003). In this model the main activities of the research process are described and interaction between these activities is illustrated.
1. Problem definition 2. Concepts to use 3. Sources of information 4. Methods for measurements 5. Methods of analysis
The heart of this model is the ‘problem definition’ and ‘the concepts to use’. In figure 2 a schematic picture of the model is outlined.
problem definition concepts to use methods of analysis sources of information methods for measurements
Figure 2: Research model (De Leeuw, 2003)
2.1 Problem definition
Since a couple of years it is very difficult for Deli XL Zwolle to achieve a positive result at the end of the year. The costs to be made when doing business are greater than achieved turnover and processes are therefore unprofitable at this moment. It is assumed that this performance gap has several operational causes. Some of these causes are known others may be
undiscovered. In order to analyze the recent performance gap, these causes should be
The problem definition contains the following points: Objective, Research question, Sub- questions and Research constraints.
2.2 Objective
The objective gives the main scope of the project; why it is conducted in the first place. The objectives of the project are as follows:
To carry out a process analysis on Deli XL Zwolle that makes clear which operational problems cause the performance gap in recent years. Second objective is to provide advice for process improvements to solve operational problems in order to increase company performance. As said before, the project consists out of two parts.
The first part of the assignment is to make an analysis of the processes within Deli XL Zwolle; the second part is to provide the company with advice to improve the company processes. The content of the second part is dependent on the results of the performance scan which will be performed to do the process analysis.
2.3 Research question
As said in the introduction of this paragraph, Deli XL Zwolle has difficulties to achieve a positive financial result. It is known that too many costs are made at this moment while benefits are lower then costs which are made according the accounting journals. However it is not known what cost drivers for this problem are.
Cost drivers in this sense are operational problems which cause higher costs than necessary. What is important for Deli XL Zwolle is that they need to know what operational causes are and how these causes can be neutralized.
Therefore the project consists out of two parts. The first part is the analyzing part and the second part is the solution part. The research question for the project is as follows:
2.4 Sub-questions
Sub question are made based on the steps in the Groningen manufacturing scan. Sub-questions that should answer the main question are:
Project part 1
In order to get an insight in what market Deli XL Zwolle is in, sub questions about the market requirements are formulated. It is vital to know what market requirements are and how Deli XL is performing in the market. This information is the basis for the further research. Depending on the outcome of the sub question for the first step in the Groningen Manufacturing scan, the sub questions of the following steps can be answered.
Groningen manufacturing scan step 1:
• Sub question 1: Which markets does Deli XL Zwolle serve?
In order to discover in which market Deli XL Zwolle is in, competitors and customers are need to be analyzed. With the help of market and competitors research reports and analysis of the customer database an overview of the market can be outlined. By doing this it can be discovered which place Deli XL Zwolle takes in their market.
• Sub question 2: Which performance objectives are required for Deli XL Zwolle? When it has been made clear how Deli XL Zwolle’s market looks like it is time to discover what customer find important and what the customers expect from Deli XL Zwolle. To find out which performance objectives are important 8 current customers are interviewed in order to find out which performance objective is most important for the market. The interviewed customers are a representation of the customer database of Deli XL Zwolle. Some large customers are interviewed but also smaller customers have answered the questionnaires. Furthermore information from a more extensive customer research performed in 2005 has been used to create a view of which performance objectives are important for customers. The importance of each objective is expressed in an importance score. With this score it becomes clear which performance objective is most important and which one is of less importance.
how well Deli XL Zwolle performs on each performance objective. Therefore customers had to fill in the second part of the questionnaire (see appendix D). The results of this part are compared with the importance score of each performance objective. Here fore the Plats Gregory procedure was performed and furthermore the importance mapping method was performed. Via these tools it becomes clear which performance objectives need to be improved.
• Sub question 4: Which performance indicators can be identified?
Dependent on which performance objectives need improvement, performance indicators are measured. In this report several indicators are measured. All performance objectives can be judged with the help of performance indicators. Which indicators were used was dependent on the recorded information available. The indicators give an insight how processes flow and perform.
Step 2
• Sub question 5: How does the current service process looks like and what are the characteristics of the relevant business processes?
In order to gain further insight in the business process of Deli XL Zwolle a closer look to the processes which influence the performance indicators researched in the previous sub question, is needed. With the help of the AAD modelling technique it is tried to create an overview of these processes. Information on the process flows was gathered by interviewing employees and observing and experience processes.
Step 3
• Sub question 6: Which operational causes can be found in relevant processes? After the relevant processes are mapped it is time to analyze in which stages of the processes problems occur and why problems occur there. Based on information
Step 4
• Sub question 7: Which other parameters are influencing the performance of the business processes?
Beside the operational problems discussed in sub question 6, there might be other causes which lead to problems in the business process. In this step it must be find out which factor lead to the operational problems in step 3. This can be done by analyze working circumstances.
Figure 3: schematic overview of how research is built up.
Project part 2
• Sub question 8: What should be done to neutralize the causes for the performance gaps In order to neutralize the problems summed up in sub question 6 & 7 it will be analyzed which improvements could lead to better performance. The effect of the defined advises will be judged on their effectiveness (when enough information is available to be able to estimate influence of that improvement).
The most important forms are observation, studying documents, analysis of ratio’s (about production, costs, etc), analysis of other research reports and simulation. These are methods where no direct interaction between the researcher and the employees is needed.
The methods that will be used during this research are:
Observation
By just looking to how the organization is working on a day-to-day basis, a lot of information can be obtained. Listening to the employees when they are discussing with each other is a very vital way to get informed about what is going on at that moment.
Studying documents
To obtain knowledge about results and objectives of past years, studying documents such as annual reports and budget plans are useful. For this research the budget plans for 2006 and (in less proportion) 2005 are used.
Analysis of other research reports
In 2005 an extensive customer satisfaction research has been performed. The results of this research are used for comparison with the results of this research. Furthermore the
performance of Deli XL Zwolle was audited in the autumn of 2005 and the results of this audit are also used in the analysis of Deli XL Zwolle’s current performance towards there customers.
Questionnaires and interviews
Questionnaires and interviews are very useful manners to get a lot of information about what is going on in the company and how processes are designed. A questionnaire with questions about current processes and things which go wrong at the moment, was developed.
Furthermore talks with the heads of the different departments are planned; not only about their own department but also about how they look to the other departments in the company.
2.5 Research constraints
Financial
During the project no large investments (such as implementing new software) are allowed to be done.
Locations
The project will be set up for the Deli XL department in Zwolle (and might be used for other departments). Internal benchmarking is done in other departments of Deli XL Holland.
Project duration
The master thesis project starts the 13th of February and ends around the end of July. The project will require about 700 hours of work (25 ects).
The first three months there are three days per week used for the research and from May first there are four days per week available for the research.
Textual constraints
2.6 Theory used
In order to perform this research several theories and concepts are used. In the following chapters, the theories described in this section are applied.
The chapters are built up according the steps of the Groningen Manufacturing Scan. This tool can be used in the performance analysis of companies.
The Groningen Manufacturing scan is based on theories about how to measure performance of business processes.
Furthermore a modelling method called Actor Activity Diagramming was used in order to map business processes.
Further explanation of the used theories can be found in Appendix F
3. STAGE 1: OBJECTIVES AND PERFORMANCE
3.1 Market
When taking a look to the market where Deli XL Zwolle is operating in, we can make some distinction between certain segments. The food service market is a large and complex market and it would therefore be impossible to serve all the market segments in the food service business.
As already stated in the company profile, Deli XL Holland is doing business in the following foodservice market segments:
• Health care facilities
• Canteens/contract catering facilities • Multi-unit "chain" restaurants
• Medium and small café, hotel and restaurant establishments • Schools and other educational establishments
• The "hybrid" segment of the market: gas and other transportation locations, store
Deli XL Zwolle is restricted by the headquarter in Ede, to do business with large institutions such as hospitals, universities or catering companies. The reason for this is the fact that these
institutions need large amounts of products every day and Deli XL Zwolle is not capable to handle this demand on a daily basis. The supply of such large organizations is done from the head office in Ede, where a large central warehouse is located.
Deli XL Zwolle has to focus therefore on the segments with “smaller” customers which are: • Medium and small café, hotel and restaurant establishments
• Schools and other educational establishments
turnover of € 150.000,- per customer. These larger customers should be approached in another way than “smaller” customers because they have other needs. For example assortment is much more important for restaurants than for snack bars because they want to serve exclusive
products according salesmen of Deli XL Zwolle.
Looking to the supply chain Deli XL is in, it can be concluded that Deli XL has a warehouse function in the supply chain. In figure 4 is shown that the goods from the factories are clustered in the warehouse of the wholesaler. The wholesaler distributes the products to the different market segments. From here out the end customer is provided with goods. In fact Deli XL has to deal with two processes as can be seen in figure 4; the replenishment process and the delivery process. The replenishment process represents the relationship Deli XL Zwolle has with its suppliers. The delivery process represents the relationship with the customers.
Figure 4: Supply chain overview
delivery
replenishement
Customer needs
After interviews and informal talks with salesmen it became clear that the target market is a very complex market. Everybody knows each other; from supplier to customer and vice versa. A close relationship between supplier and customer is seen as key objective for success. If a good relationship is maintained and you have a good reputation, customers accept possible problems more easily. To build up a good relationship it is important to know what a customer finds important in the way he is being served.
Therefore it is required to discover which aspects of service are really important for customers. As a company is not able to excel on all 5 performance objectives they have to make choices in which objective they want to be good. Therefore it is important to be sure what the order
winners are. By performing a “Platts Gregory Procedure” it is becomes clear what order winners and order qualifiers are for the market Deli XL Zwolle is in. In the next section the outcome of the “Platts Gregory Procedure” is shown.
The service delivered by Deli XL Zwolle contains aspects of quality in the sense of product quality, aspects of delivery in terms of on time delivery of the right products according appointments within a certain lead time and finally aspects of flexibility in terms of ability to modify assortment or order and appointments about time of delivery. This statement is based on interviews with employees of Deli XL Zwolle.
Competitors
While talking with the salesmen of Deli XL Zwolle it became clear, that there is a lot of competition in the market. This becomes clear in the fact that salesmen have to do their very best when making offers to potential customers. Sometimes 4 of 5 offers have to be made and even then it happens that a customer goes to another supplier. A consequence of this fact is that the margins which are achieved are close to the edge. This indicates that margins are just enough to cover all costs when processes flow how they are supposed to flow. Whenever mistakes are made this immediately indicates that there is a high chance that the service
towards that customer was unprofitable. As it is already difficult to cover all costs, making profits is therefore even harder to reach.
Deli XL Zwolle considers the following competitors as most important:
Horesca
Sligro Food Group N.V
Sligro Food Group N.V. encompasses foodservice and food retail companies selling directly and indirectly to the entire Dutch food and beverages market. The Central distribution centre and head office are located in Veghel. They have a network of 43 cash and carry and 11 delivery wholesale outlets.
Hanos
Hanos was founded in 1975 and nowadays the head office is located in Apeldoorn. They have 12 locations across the Netherlands and a location in Antwerpen (Belgium).
Therefore they are able to deliver nationwide in the Netherlands. Deli XL Zwolle has to compete
Further information about the competitors can be found on their web sites.
Deli XL’s market share on the foodservice market is about 13 % and it is therefore one of the larger players in the market. Sligro nowadays has about 15 % of the foodservice market. Hanos and Horesca are smaller players on the Dutch foodservice market. Makro / Lukas Kramer is far out the largest on the Dutch foodservice market with about 23%. However in the sales area of Deli XL Zwolle, Hanos and Horesca are large players while Makro has a very small market
Overview of the market
As said Deli XL Zwolle has to focus on the segments with the “smaller” customers which are: • Medium and small café, hotel and restaurant establishments
• Schools and other educational establishments
• The "hybrid" segment of the market: gas and other transportation locations, store
About 85% of there customers are in the first segment and therefore this segment is considered to be most important. Deli XL Zwolle faces heavy competition in offering there service to this market segment. Every competitor has its specific strong points and considers other
performance objectives as order winners according research reports of Deli XL and competitors’ websites.
- Horesca - order winner: delivery - Sligro - order winner: price
- Hanos - order winner: (product) quality
share. Unfortunately there are no concrete market shares facts available for Deli XL Zwolle’s sales area.
In the next paragraph the outcomes of the Platts Gregory Procedure are discussed in order to find out what customer requirements are based on the opinion of current Deli XL customers. Therefore it can be expected that the delivery performance objective is considered as most important because this is the distinctive capability of Deli XL Zwolle.
3.2
Market analysis (Platts Gregory Procedure)
To find out what requirements of the customers are, several customers are approached to fill in a questionnaire. In appendix B the questions which were asked are shown. Purpose of this questionnaire is to find out which of the performance objectives are most important to the customer. The results of this questionnaire are compared with the results of a much more extensive customer satisfaction research done in 2005. Unfortunately the response on my questionnaire was not very high (8 responses ) and is therefore not reliable enough. Although it gives a first expression about what customers find important.
It should be noted that the scores in the extensive research were based on a 5 point scale. The questions about performance in my research were based on a 10 point scale. In Appendix E the results found by the auditors of the extensive customer satisfaction research are showed. Also the converted scores for the extensive research in order to convert the 5 point scale in to a 10 point scale can be found here. This is done by simply multiplying the scores with factor 2. When taking a look to the average scores for the indicators in the extensive research the following scores for each performance objective can be found.
Quality: 16 indicators with average score of 3,26 (6,5) Delivery: 6 indicators with average score of 3,17 (6,3) Flexibility: 5 indicators with average score of 3,17 (6,3) Price: 1 indicator with score of 3 (6)
This indicates that customers find the performance of Deli XL Zwolle reasonable. However it is expected that some performance objectives are more important for customers than other performance objectives. Therefore it should be researched which objectives are order winners and which are order qualifiers or even less important factors. This is done by asking customers of Deli XL to react on several propositions (see appendix B)
When analyzing the results of the questionnaire positions (see Appendix C), it can be found that the performance objective delivery is judged to be more important in comparison with another objective for, on average, 80 times. Quality is judged 63 times to be more important in
Therefore it can be concluded that the delivery performance objective is most important for customers of Deli XL. Quality is also important for the customer looking to the total scores, while price and flexibility are of less importance. However when observing each customer individually it can be seen that for one customer price is extremely important in comparison to the other performance objectives. Another customer indicates quality as far most important. Therefore it is difficult to do any statements based on the total scores because there is a lot of variance in individual customer importance. A conclusion based on the scores of the positions, is the fact that all customers consider delivery as an important aspect; the delivery aspect is in all cases most important or second most important based on the positions in the questionnaire. As already stated, from talks with the salesmen of Deli XL Zwolle it can be learned that customers are extremely demanding. This statement is in line with the findings of the questionnaire as no less important performance objectives can be depicted. Therefore Deli XL Zwolle has to take care that they perform good enough on all performance objectives and especially on the
delivery objective. In combination with the results of question 1, it can be concluded that delivery is an absolute order winner; quality is also an order winner while flexibility and price are order qualifiers.
To answer question 1 customers should sequence the performance objectives by importance, whereby place 1 is most important and place 4 is least important. For the total score for
question 1, place 1 gets 1 point, place 2 receives 2 points etc. This means that the performance objective with the lowest total score is the most important objective.
Analyzing the results for question 1 in Appendix D, it can be concluded that this result is
reasonably in line with the results of the propositions. Again delivery and quality are considered as the important performance objectives while flexibility is again of less importance when looking to the total scores.
The results for question 2 give an indication about the current performance of Deli XL Zwolle for each performance objective. Several aspects of each performance objectives are judged on a 10 point scale by participating customers. This has led to a mark for each performance objective by calculating the average score based on the marks for each aspects.
The scores for each performance objective are for and close to 7. This indicates that based on the questionnaire the performance of Deli XL Zwolle is reasonable. This conclusion is also in line with the results of the extensive research where performance was also judged as
In figure 5 the results are showed in a Platts Gregory graph. The red dotted line indicates the customer importance. The blue line indicates the performance of Deli XL Zwolle on this performance objective. The customer importance line is based on the results of the
propositions. The delivery performance objective (80 points) is the most important objective and is therefore specified with importance level 9. Because delivery is seen as the distinctive
capability of Deli XL the performance objective delivery should be rated as very important; by giving the delivery performance objective importance level 9 this importance is showed. Quality (63 points) is rated therefore on importance level 7,1 ((9 *63)/80= 7,1). Price (48 points) and flexibility (49 points) are rated respectively at 5,4 ((9 *48)/80 = 5,4) and 5,5 ((9 * 49)/80 = 5,5) and are therefore almost of equal importance. By introducing an importance level, the
difference in importance for order qualifiers (price and flexibility) and order winners (delivery and quality) is declared.
In figure 5 it can be seen that according to the results of the questionnaire, Deli XL Zwolle performs reasonable. There are no insufficient marks; however there are some gaps between performance and requirements. It can be seen that there is a positive gap between
requirements and performance in the area of price and flexibility. At this moment no further improvements are necessary therefore because, when taking the meaning of order qualifiers in to account, no additional orders are earned when improvements are made in the area of these performance objectives. In fact based on the results of the questionnaire it may be considered to give up some performance in these areas in order to be able to make improvements in the area of the quality and delivery performance objectives. Because if we look to the delivery and quality objectives, we can see there is a (small) negative gap between customer requirements and Deli XL performance. The largest gap is in the delivery area. As already stated this is the most important performance objective for customers and for that reason it would be wise to search for improvements which positively influence the delivery performance objective.
low high
0 1 2 3 4 5 6 7 8 9 10
Quality
quality of products contact moments
communication towards customer customer complaint handling employees quality
Delivery lead time
right product and quantity on time delivery product availability Flexibility product flexibility mix flexibility volume flexibility delivery flexibility Costs/ price costs/ price
Gap analysis for customers
Figure 5: Platts Gregory Procedure (Slack, 2004)
In figure 6 the important performance mapping method is showed. This method can determine which performance objectives need extra attention. The results of the Platts Gregory Procedure are the input for this graph.
For assessing current performance, the average score based on the results of the research in this report and the converted score of the extensive research, was used. For customer
importance the scores also used in figure 5 (red dotted line) are putted in. As can be seen in figure 6, Deli XL Zwolle performs appropriate on 3 out of 4 performance objectives. However the most importance objective delivery is below the AB line.
When taking a look to current performance in practice, many things are going wrong in delivery towards customers. Unfortunately there is no information available on backorders2 due to
mistakes within the business processes. However based on figure 6 it can be concluded that delivery needs to be improved. Furthermore the quality performance objective is on the AB line and because of the relative high importance for customers it is wise to search also for
improvements in this area.
9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 Urgent action Appropriate Improve Low High
Importance for customer
Ba d G oo d Cu rren t P erf orma nce D B A C Excess? F E Quality Price Flexibility Delivery
Figure 6: Important performance mapping (Slack, 2004)
Due to the fact that the delivery and quality objectives are considered to be order winners and could be improved (especially the delivery objective), performance indicators for these
objectives will be analyzed in the next section.
2 Backorder occurs when a customer orders a product which is not an inventory article (because of low sales volume)
3.3
Performance Indicators
To be able to analyze the actual performance of a company it is important to make the performance objectives measurable in order to make any statements about the business process. This can be done by measuring so called performance indicators or performance criteria. These are specific characteristics of the business process, which can be measured for estimating concerned performance (Schönsleben, 2004). The results of this measure should reveal which process parameters should be considered more deeply. This is done in step 2 and 3 of the Groningen Manufacturing scan.
3.3.1 Quality
Mistakes Factor (# of mistakes / # of orders picked (internal))
With this indicator an indication is made about the mistakes which were made in the order picking process. Every order is checked before “transferred” to the transport department. Each order picker receives feed-back on every single mistake made. A mistake can be a wrong product which was picked or too many or too less products picked
The order pickers have to fill in a colli list when they are picking orders.
Every order which they have picked should be noted on that list. They have to fill in the name of the customer, point in time when they started with picking the order, point in time when they were ready and the amount of colli to pick.
When a mistake was made, the inspector makes a note of it on the colli list of the order picker who made the mistake.
In total 731 orders were examined for mistakes, resulting in the discovery of 31 mistakes.
The mistake factor is therefore:
31/ 731 ≈ 0, 0424
This means that based on this information in 4,24% of orders picked, mistakes are made and discovered before transportation. Notable is that these orders are picked under normal circumstances. This means that there is plenty of time to pick the orders.
Customer Complaint rate (# of rejected facts / # of facts (external))
With this indicator, an indication about the discrepancies between customer order specifications and to what extent Deli XL Zwolle is able to meet that specifications, is made. This discrepancy can be expressed in the customer complaint rate. A high customer complaint rate means a lot of discrepancy. The discrepancy is caused by the fact that Deli XL Zwolle has made “undiscovered mistakes” in processing the order. Several mistakes types are possible, but every mistake represents an order rule which was not fulfilled in first place. It is possible that several mistakes were made in handling one order; some are more critical than others; but all of them lead to a discrepancy between initial order specifications and the service Deli XL Zwolle has delivered.
.
The number of facts is the total amount of order rules in the revised period (week 1 until week 17 of 2006). Mistakes which were discovered when delivering the order to the customer are the rejected facts.
Based on information about the first 17 weeks of 2006 it was found that approximately 2300 “mistakes” were discovered. Information about the number of mutations which had to be made by the administration department was used . Mutations, which were of no influence on
performance towards customers, were filtered out. Besides these mutations also 179 shortages3 were communicated to the tele-sales department.
Until week 17 a total amount of 10767 orders have entered the system. All these orders together represent a total amount of 103442 order rules.
Customer Complaint rate therefore is:
(2300 + 179) / 103442 ≈ 0,0239
In 2,39% of all order rules Del XL Zwolle was not able to meet order specifications.
Customer satisfaction score
In the autumn 2005 an extensive research about customer satisfaction of Deli XL clients was performed. All aspects researched by the audit team can be found in appendix E
Looking to the average customer satisfaction, based on the research of the audit team it can be concluded that average customer satisfaction is 6,4. This indicates improvements are needed while a 6,4 is reasonable but not a very good score.
Based on the questionnaire the customer satisfaction is reasonable (already discovered in performing the Platts Gregory procedure figure 5). On average customers rate Deli XL Zwolle’s quality with 7,2. Looking to the score in the extensive research for the quality performance objective a score of 6,5 can be found. Again this are reasonable scores but it is needed to achieve better scores while quality is considered to be second important order winner. In order to distinguish them selves on the market Deli XL has to achieve high performance in the order winner (delivery and quality) areas.
3.3.2 Delivery
Fill rate Customer service ratio (# of products delivered on desired delivery moment / # of products ordered)
When analyzing this indicator an indication about how good Deli XL Zwolle is in delivering their orders according specifications can be made.
Information about the amount of backorders during the revised period was available and it is also known what the amount of shortages was. In both cases the products were not delivered on the desired delivery date and therefore adding up these two parameters gives the number of times products/ order rules were not delivered according specification.
103442 order rules were placed during the period.
Backorders: 572
Shortages: 179
751 order rules not delivered on desired delivery date.
Fill rate Customer service ratio: (103442 – 751)/ 103442 ≈ 0,993
This indicator gives a very good score, but unfortunately this is not a good representation of the truth. The number of backorders and shortage’s are only the numbers which were registered in the system.
Frequency of deliveries which are below minimum order size
The frequency of delivery to a certain customer depends on the turnover that customer brings in. If a customer brings in more than € 350,- per week he has the right to be delivered twice a week. On the other side a customer is restricted to order for more than €150,- when he is placing an order. This border is set to cover logistic costs which have to be made to transport goods to the customer.
Based on information of the logistics department I can conclude the following:
Total number of orders: 10767
Total number of orders below minimum order size: 1062
This means that 9,86% ((1062/10767) *100) of all orders placed were to small and that they did not create any yield therefore. Moreover they were loss-making because the order does not cover logistic costs.
Capacity utilization (Actual load/ theoretical capacity)
Order pick process
The actual load per day for Deli XL Zwolle can be predicted quite well. Customers mostly order the same amounts and the same products every time they order. Therefore it is known when the peak moments in order pick capacity usage are. Furthermore order pick capacity within Deli XL Zwolle is flexible and therefore these peak moments can be handled quite easily. Capacity is flexible because the work to be done should not be that difficult. Therefore it is possible to hire cheap low schooled temporarily employees shortly before they are needed. Deli XL Zwolle makes use of this possibility regularly. Furthermore it is possible to use employees of the other departments who can help when there are peak demands. Theoretical capacity is therefore flexible and (to a certain extent off course) unlimited. In this context therefore, I will calculate capacity utilization working with regular capacity. Regular capacity indicates 5 orderpickers at duty in the warehouse from Monday till Friday;
2 á 3 employees in the DKW (grocery products) warehouse (on average 2,5) 2 á 3 employees in the deep frost products warehouse (on average 2,5)
are picked. Every day early in the morning the fresh products have to be picked for transport on the same day. There is no information about the share of fresh products colli with regard to the total amount of colli’s because fresh products are not registered into the system. This is
because fresh products are cross-selled 4 at the warehouse of Deli XL Zwolle. Therefore it is not
possible to split used capacity into used capacity for fresh products and capacity used for grocery products. Therefore I assume that total amount of colli’s to be picked is done on the day before delivery day. As a consequence this will result in less accuracy because total amount of colli’s to be picked on a particular day is not correct. However it is known that the share of fresh products is much smaller than the grocery products and the fluctuation in daily amounts in fresh products is not high and therefore deviation is almost negligible; I have asked several
orderpickers about fluctuation in amount of fresh products to be picked and they all stated that amounts are practically the same every day.
Theoretical Capacity:
An employee normally works 36 hours a week.
Therefore every week 5 * 36 = 180 hours are available for the order picking process. However order pickers are also assigned with tasks as checking best before dates.
Estimations of a full time order picker are that he is doing other things than order picking for about 30 minutes a day. This is 2,5 hours per week.
Ergo 5 (number of order pickers) * 2,5 = 12,5 hours per week are spent on date checking.
Remaining hours available for order picking: 180 – 12,5 = 167,5 hours per week.
The headquarter of Deli XL has stated that an order picker should be able to pick 150 colli per hour.
Theoretical capacity therefore is: 167,5 *150 / 5 ≈ 5000 colli per day.
If we compare actual load (average of collies to be picked) with theoretical capacity we get daily capacity utilization as showed in figure7.
4Cross-selling: products are not stored at the warehouse but are order picked and transferred in to the
Total collies to be picked (demand) Average of collies to be picked Capacity utilization Variance in demand Standard deviation Monday 79071 4652 93,0% 134603 367 Tuesday 53936 3173 63,4% 322720 568 Wednesday 57982 3411 68,2% 717368 847 Thursday 71781 4223 84,5% 825106 908 Friday 12277 + 46625 723 + 2743 69,3 % 1833738 1354 Total (5 days) 321672 18922 75,7%
Figure 7: Overview of demand and capacity utilization order picking process
From figure 7 follows that capacity utilization fluctuates a lot and that problems could be expected on Tuesdays and Fridays because of the high utilization rates on Mondays and (to less extent) Thursdays. If the pressure of work is high it can be expected that more mistakes are made. Based on my own experience in my period at Deli XL this also counts for Deli XL Zwolle. There is no detailed information available but problems mostly occur on Tuesdays or Fridays and delivery afterwards takes place mostly on these days. This statement is based on
experiences of the warehouse manager and the logistic manager. When I asked them which day most troubleshooting is needed they both answered separately from each other on Tuesdays and Fridays.
Tele-sales department
Deli XL Zwolle has 4 tele-sales employees assigned. In the revised period every day 2 employees were at work. They work both 8 hours a day. One is starting at 6:00 AM and is working until 15:00. The other employee is working from 8:00 till 17:00. Therefore there are three different capacity periods on a day. In figure 8 the capacity distribution is showed. From 6:00 till 8:00 the task of the employee is to listen to a recorder. Via this recorder customers can add some products to their initial order in case of emergency. The employee has to register the requested products in to the system. From 8:00 until 17:00 the employees have to answer invoices and register incoming orders in to the system.
0 1 2 3 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 Time em pl oy ee s av ai labl e
Figure 8: overview capacity distribution tele-sales department
If we look to the order entry data in figure 9 we can see that on Thursday after 15:00 about 21% of the orders are coming in. A large share of this percentage is coming in by fax and telephone between 15:00 and 17:00. Only 2 work hours are available to handle this data stream. We can also see that a lot of orders are coming in the weekends. This are orders which are placed via internet and therefore no employee is involved in the order entry stage.
Figure 9: Order entry at tele-sales department
Besides the order entry, the tele-sales department is also responsible for answering invoices. The more invoices there are, the less time there is for order entry. Most invoices occur between 9:00 and 15:00 after the order was delivered to the customer. In this time period capacity of the tele-sales department is at his maximum. Unfortunately it is not known how long waiting times are before response. What is known from the customer complaint registration is the fact that customers often complain about long waiting times when they invoice Deli XL Zwolle.
The objective for order entry is that at 15:00 at least 80% of all orders for the next day are registered in to the system. This means that 80% of the demand for the next day is known at 15:00.
During the researched period on average 83% of all orders were noted before 15:00. During the summer months it is expected that this average will be closer to 80% because customers will do more business and more invoices will be there.
Transport department
Deli XL Zwolle has 6 trucks available and therefore at least 6 drivers are needed. It was estimated that a truck can carry on average 800 collis per drive. The objective is that a truck makes one drive per day. This means that theoretical capacity is
Orderentry Monday Delivery day Tuesday
86,06 % 13,94 % Orderentry before 15:00 Orderentry after 15:00 Orderentry Tuesday Delivery day Wednesday
85,66 % 14,34 % Orderentry before 15:00 Orderentry after 15:00 Orderentry Wednesday Delivery day Thursday
89,47 % 10,53 % Orderentry before 15:00 Orderentry after 15:00 Orderentry Thursday Delivery day Friday
79,60 % 20,40 % Orderentry before 15:00 Orderentry after 15:00 Orderentry Friday + w eekend Delivery day Monday
6 trucks * 800 colli = 4800 colli per day
When taking a look to the facts of the period May up to and including September 2005 (this is the high season and therefore most capacity is used), we can conclude the following:
Delivery Day Average amount of colli Capacity Utilization (volume) Average drives per day Variance in drives per day
Monday 4120 85% 5,19 0,43 Tuesday 3882 81% 6,41 0,23 Wednesday 3745 78% 5,71 0,65 Thursday 3046 63% 5,56 0,40 Friday 4703 98% 6,65 0,53 Total 19496 81%
Figure 10: overview of colli to be delivered
On Fridays capacity utilization is extremely high; luckily there is some fluctuation possible because of an extra van and a small truck with refrigerator which can be used when there are extreme demands. However the objective is to supply the customers with the 6 trucks (and 6 drivers). As already discussed variance in demand is extremely high. As we can see capacity utilization with average demand is already high on Monday and especially Fridays. The chance that capacity is not enough (due to fluctuation demand) is therefore considerable. Deli XL Zwolle has to be very creative in these situations in order to find a way to transport all goods. As said there is a small truck which can be used. Another possibility is to make more drives, however as most drives are taken 7 to 8 hours this is not always easy to realize. When looking to drives needed per day we can found that on average on Tuesdays and Fridays more drives are needed than available. As variance is not very high this seems to be quit structural. This indicates that expressed in drives available capacity is not enough on these days.
Amount of colli per order
Colli per minute
Average order size Average colli picked
30,3 2,39 Standard deviation Standard deviation
32,58 1,76 Variance Variance 1061,28 3,09
Figure 11: statistics of orders when backorders included.
The large variance of the order size can be explained partly through the amount of backorders which were also handled as one order. A backorder is always a very small order, because it is in fact part of another (already delivered) order. I have assumed in consultation with the company that a backorder is never larger than 5 items.
However when leaving out the backorders (order size is < 5) it can be found that the variance in order size is almost the same (see figure 12). This indicates that the backorders do not have much influence in order size average and that order size fluctuates a lot.
Amount of colli per order Colli per minute
Average order size Average amount of colli
33,2 2,58 Standard deviation Standard deviation
32,89 1,73 Variance Variance 1082,08 3,01
Figure 12: statistics of orders when backorders not included.
Proportion of products in stock
When taking a look to the inventory days of Deli XL Zwolle during the researched period (figure 13) it was found that the actual amount of inventory days exceeds the objective amount of inventory days (38,58 days) most of the time. This means that Deli XL Zwolle stores more products than needed in their own vision.
The inventory levels are high and therefore problems with duration dates will occur easier; also damage to products will happen faster when there is a lot of inventory because of a lack of space in the warehouse. A remark which should be made is that Deli XL Zwolle is very active in discount purchasing. When a supplier has an advertising campaign, Deli XL Zwolle buys the products in large quantities. Therefore they achieve a higher margin on that certain product. Problems in exceeding of duration dates etc. should not be searched in these products because these are fast mover products. But off course these products do influence the inventory value. For example the extreme increase in week 20 was a discount purchase for a famous cola brand. Inventory Days 0,00 10,00 20,00 30,00 40,00 50,00 60,00 70,00 80,00 90,00 100,00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 weeks in ve n to ry d ays Objective Actual
Figure 13: Inventory days.
Measurements which support the control of actual inventory give an indication about the direct losses due to:
- exceeding of duration date of products - damage to products
- difference in expected inventory and actual inventory
When taking a look to information about these indicators I have found the following facts. Up till week 22, already 89,9 % of the budget for losses due to exceeding of duration date of products, was used. A loss of €15.000 was allocated for 2006. This means that up till week 22 direct losses were 0,899 * €15.000 = €13.485.
Up till week 22, 54,1% of the budget for losses due to damage to products, was used. A loss of €3.000 was budgeted. Direct losses to damaged products were 0,541 * €3.000 = €1.623
Up till week 22, 14,2 % of the budget due to differences in expected inventory and actual inventory was spent. The budget for these losses for 2006 is €19.000.
Losses up till week 22 are 0,142 * €19.000 = € 2.698.
Total direct losses: €13.485 + €1.623 + €2.698 = €17.806
These are facts of the first periods of 2006. This period is a “quiet” period; the demand pattern shows a seasonal pattern whereby the busy period is from May up to and including August. If we look to the direct losses of 2005 we can conclude the following facts:
- exceeding of duration date of products: € 55.961
- damage to products: € 6.103
- difference in expected inventory and actual inventory € 2.876
Total € 64.940
In 2005 total turnover was € 9.875.207. Total costprice was € 8.228.577
Calculating the margin ((turnover-costprice)/ turnover) gives
Margin = (€ 9.875.207 - € 8.228.577) / 9.875.207 = 16,7%
Calculating margin and take into account the direct losses of above indicators gives the following fact:
Due to direct losses Deli XL has lost 0,7% of the margin they have achieved in 2005.
Calculating the remaining margin for the first 21 weeks of 2006 gives the following figures: Turnover: € 4.123.000
Costprice: € 3.401.000
Margin: (€ 4.123.000 - €3.401.000) / €4.123.000 = 17,5%
Calculating margin and take into account the direct losses until week 21 of 2006 gives the following fact:
Margin: (€ 4.123.000 - €3.401.000 - €17.806) / €4.123.000 = 17,1%
Therefore 0,4 % of the margin achieved over the first 21 weeks is lost due to direct losses. This indicates a better achievement in comparison to 2005, but the year 2006 is not over yet and a lot can happen (for example in week 45 of 2005 there was a loss of 10.500 due to exceeding duration date).
3.4
Conclusion stage 1
Taking a look to the aspects found, it can be seen that Deli XL Zwolle is performing reasonable towards there customers according a questionnaire and an extensive research performed in 2005. However Deli XL Zwolle does not really excel in one of the performance objectives and therefore improvement is advisable. Especially in the performance objectives quality and delivery improvement would be wise, because these performance objectives are considered to be most important for customers.
In figure 14 an overview of indicators is showed.
Performance Indicator What’s Measured?
Quality: Mistake factor 4,24%
Quality: Customer complaint rate 2,39%
Delivery: Fill rate Customer service ratio 99,3%
Delivery: Frequency of deliveries which are
below minimum order size
9,83%
Delivery: Capacity utilization order pick process Average: 75,7% Delivery: Capacity utilization tele-sales department Order entry: OK
Invoices: Insufficient (customer complaints ratio) Delivery: Capacity utilization Transport Volume: 81%
Drives: On average shortage on Tuesdays and Fridays.
Delivery: Variance in order size High
Delivery: Proportion of products in stock High in comparison with objective. Variance in demand (colli to be picked) Very high
Figure 14: Overview of indicators
What can be seen is that the utilization rates are quite high and that there is a lot of variance in the processes. This means that processes are difficult to manage and therefore are more vulnerable for mistakes. This is also what is happening at the moment as mistake factor is more than 4 %. In addition customer complaint rate is 2,39 %. Roughly this indicates that 4 + 2,39 = 6,4% of all orders are not error free. As already said this are only registered fact. In practice the values are probably even higher. What is important to discover is how these fact are interrelated and how they are affecting each other.
What is tried to do, is to discover what is causing the variance in the processes and why
4. STAGE 2: IDENTIFICATION OF RELEVANT PROCESSES
In figure 15 an overview of the business process of Deli XL Zwolle is showed. Mission and Strategy which are in Process Control are developed by the headquarter in Ede; Objectives are formulated in a budget and are reviewed every year. Budget should also be approved by headquarter.
The Primary Processes are the processes which are responsible for handling the orders. Sales department is responsible for order entry. Warehouse is responsible for receiving goods and the order pick process. Transport is responsible for order delivery while after- sales and a service is mostly done by the representatives. The secondary processes are the processes which support the main process. Within Deli XL Zwolle the following departments can be distinguished: Inventory Management, Administration.
Primary Processes
Sales Warehouse Transport Aftersales/ Service Process Control Secundary Processes Purchasing HRM Administration Inventory Management Strategy Mission Objectives Customer order Customer satisfaction
Figure 15: Business Process of Deli XL Zwolle
in secondary processes can be discovered by the company itself before the customer has any notice of the mistake.
When analyzing the most relevant processes for a certain performance in the delivery and quality aspect it can be concluded that the following processes are important.
o All primary processes because of the reason mentioned above. o Inventory Management
o Purchasing
The Main process and the relevant processes are analyzed and in the following figures they are outlined in Actor Activity Diagrams (Schaap, 2000). Furthermore the efficiency and
effectiveness of the overall business process are discussed.
Main Process
In figure 16 a representation of the overall main process is showed. In this section a short explanation of the scheme is given.
1. Customer places an order at the telesales department.
2. A telesales employee registers the order into the information system.
3. Simultaneously the employee is checking the inventory of the requested goods with the help of the information system.
4. A: When the articles are in stock the registered order is being forwarded to the warehouse. (To step 9)
B: When article is not in stock or when article is a non inventory article, the telesales employee is sending a request to the inventory management / purchase
department.
5. The inventory/ purchasing department checks inventory of particular article with help of the information system.
6. Inventory/ purchasing department orders goods necessary with help of the information system and places a purchase order to a certain supplier.
7. The supplier delivers the goods to the warehouse department
8. The warehouse employee registers and control incoming goods in order to be able to know which articles are in inventory.
9. To be able to pick the orders, the warehouse department prints the pick list. This is an overview of articles order by specific customer.
10. An orderpicker gathers goods requested.
11. When an order is gathered an inspector checks and completes the order. 12. When order is correct, articles are forwarded to transport department. 13. order is placed in assigned truck
14. Order delivered to customer.
Effectiveness
Check 1 Are the customer requirements clear at the transition à charge and translated into specifications?
When a customer places his order, the order is registered in to the system and the order specifications are printed. Customer requirements become clear when he is placing his order. The translation in to specifications happens when the order is registered in to the system. However, looking to the order specifications at the transition à charge for the overall process it can be said that these specifications are not always clear enough. When analyzing the
customer complaints, it can be concluded that most complaints are about not meeting
specifications. Up till week 22, 131 customer complaints are recorded. Approximately 95% of the complaints had to do with not meeting customer specifications. This was due to pick mistakes or shortages.
Check 2 Has a check on satisfying specifications taken place at the transition à décharge?
There is no check anymore at the transition à dècharge. When specifications are not satisfied this will be discovered after delivery to the customer.
Check 3 Are there any explicit control activities in the business process?
Every order picked will be checked by an inspector. There is therefore an explicit control activity in the business process.
Efficiency
Check 4 Are there any unnecessary activities, like redundant, manual or postponed activities?
When taking a look to the overall process, we see many manual activities. Orders are registered manually when customer is placing orders by telephone or fax. Furthermore order picking is done manually. Also control activities are done manually. This costs a lot of time and is error sensitive.
Check 5 Are there any actors who do not add (enough) value?
Check 6 Are there any transitions other than typical?
There are not any transitions that are strange or only performed sometimes.
Looking to the efficiency and effectiveness of the overall business process it can be concluded that the effectiveness of the process is not always optimal. Deli XL Zwolle has difficulties with fulfilling specifications, unless the control activity.
Furthermore efficiency is strongly diminished due to the fact that order picking is done manually without the help of scanners for example. Because of this fact the order picking process is sensitive for error. Also order control is done with the naked eye. Therefore the chance is considerable that mistakes are slipping through.
Tele Sales Department
Most important task for telesales employees is to take up orders from customers and to answer invoices. As said order entry is possible via several ways; by fax, telephone and internet (Bestel XL).
In figure 17 the order entry process via fax and telephone is showed.
1. The customer is placing his order to the sales department.
2. A telesales employee registers the order into the information system.
3. Similarly the employee is checking the inventory of the requested goods with the help of the information system.
4. A: When article is available go to step 7.
B: When article is out of stock telesales employee offers alternative to customer. (to step 5)
C: Requested article is non-inventory article (to step 6).
5. Customer makes decision; A: Requested article on backorder list (to step 6). B: Requested article not on backorder list.
6. Telesales employee registers article on backorder list. 7. Register order in to information system.
8. Confirm order to customer.
In figure 18 the order entry process via internet is showed. Customers need to order before 15:00 when using Bestel XL.
1. The customer has a request for goods.
2. The customers logs in to the Bestel XL system and register his demand. 3. The Bestel XL system confirms the order to the customer.
4. If a customer wants to order after 15:00 he has to inform the telesales department. 5. A telesales employee checks if the order is registered in the information system. 6. A: When order is complete go to step 8
B: When order is not complete customer is informed.
Inventory Management / Purchasing
In figure 19 an AAD scheme of the replenishment process is showed.
A part of this process is also showed in the AAD scheme of the overall business process. This indicates the importance of this process, while it is responsible for the replenishment of goods and therefore for the continuity of the company. If no goods are coming in, customers can not be served properly.
Here follows a short explanation of the steps in the AAD scheme of the replenishment process. 1. The inventory manager gets a message from a telesales employee (via the information
system) that replenishment of particular goods is needed. This need follows from a request of an external customer for goods which are not in stock or when inventory levels are below safety stock levels.
2. The inventory manager checks inventory with the help of the information system. The system gives an overview of articles which need to be ordered.
3. The inventory manager orders goods necessary with the help of the information system. 4. A purchase order is placed at the chosen supplier.
5. The supplier delivers the goods.
6. A warehouse employee registers and controls the incoming goods in order to be sure that correct product and quantities will enter the warehouse.
In figure 20 an AAD scheme of the “assigning locations process” is showed. Warehouse management is important for a wholesaler as Deli XL while it is important to have a logic sequence of products in the warehouse. Walking lines need to be as short as possible in order to be able to pick orders fast. Furthermore Deli XL has to take volume and weight of products in to account when placing a certain product in to the warehouse.
1. A telesales employee requests that an article is taken up in the assortment.
2. The warehouse manager decides if there is enough demand for the article. Demand not enough go to step 3.
Demand enough go to step 4.
3. When demand is not enough telesales employee has to look for an alternative or she has to take care that there becomes more demand for the article.
4. When demand is enough, the warehouse manager assigns a location to the products. From now on the product should be shelved on this location.
5. The inventory manager orders the goods and forwards a purchase order to the supplier 6. The supplier delivers the goods.
7. A warehouse employee registers and controls the incoming goods in order to be sure that correct product and quantities will enter the warehouse.
8. The inventory manager is informed that products are in house.
