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ON THE PERFORMANCE OF THE ORDER

FULFILLMENT PROCESS AT SHIMANO’S OTC

DEPARTMENT

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ON THE PERFORMANCE OF THE ORDER

FULFILLMENT PROCESS AT SHIMANO’S OTC

DEPARTMENT

MASTER THESIS

Name student: Robert Kwast

Student number: 1656260

Name University: University of Groningen

Department: Faculty of Economics and Business MSc. BA Operations and supply Chains

Address: Nettelbosje 2

9747 EA Groningen

Name organization: Shimano Europe Holding

Department: Shimano Benelux

OTC department

Address: Industrieweg 24

8071CT Nunspeet

Supervisors RuG: Dr. G.A. Welker

Dr. M. Broekhuis

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ACKNOWLEDGMENTS

This thesis marks the final part of my study in Business Administration at the University of Groningen. For this thesis, I have performed a case study on the performance of the order fulfillment process at Shimano’s OTC department. In this section I would like to express my appreciation to all the people who have helped me during this project.

In the first place I would like to thank both of my supervisors, André Branten and Gera Welker. André Branten (Senior Manager at Shimano Europe) gave me the opportunity to carry out this research project. During the project, André has always been available when I needed his support and advice, and working with him has been a great pleasure. André is very lively person and knows how to motivate and direct people in the right direction. Gera Welker (Assistant Professor Operations Management at the University of Groningen) guided me during my research project. We have met many times, and I am really thankful for all of her effort helping me through the entire project. I have always enjoyed the informal character during all of our meetings. I think I have been very lucky with these people to guide me during this project.

I would also like to thank all the people in the OTC department with special attention to the Account Back-up officers who have invested a lot of time in this project. Without their pro-active support it would have been very difficult for me, if not impossible, to finalize this project.

Last but not least, my parents. Not only have my parents supported me during my thesis project, they have supported me throughout the entire study. I am very thankful for their ever-lasting support. I really could not have done it without them!

Robert Kwast

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TABLE OF CONTENTS

MANAGEMENT SUMMARY... 5

1. INTRODUCTION ... 7

1.1 INTRODUCTION TO THE ORGANIZATION... 7

1.2 THE OTC DEPARTMENT... 8

1.3 THE ORDER FULFILLMENT PROCESS AT OTC ... 10

2. PROBLEM DEFINITION... 16 2.1 PERFORMANCE ANALYSIS... 16 2.2 RESEARCH QUESTIONS... 18 3. RESEARCH DESIGN... 19 3.1 CONCEPTUAL ANALYSIS... 19 3.2 RESEARCH STRATEGY... 22 4. PROBLEM ANALYSIS... 24

4.1 ADEQUACY OF THE ERP SYSTEM... 24

Discussion ... 25

4.2 AMOUNT OF WORKLOAD... 26

Discussion ... 27

4.3 ADEQUACY OF WORK DIVISION... 28

Discussion ... 30

4.4 CONCLUSION... 30

5. SUGGESTIONS FOR IMPROVEMENT... 32

5.1 IMPROVEMENTS IN THE ERP SYSTEM... 32

5.2 IMPROVEMENTS IN ORGANIZATION STRUCTURE... 34

5.3 IMPROVEMENTS IN PERFORMANCE MANAGEMENT... 37

6. PERSONAL REFLECTION ... 39

APPENDIX 1: ORDER PROGRESS DIAGRAM ... 40

APPENDIX 2: CREDIT NOTE ANALYSIS ... 41

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MANAGEMENT SUMMARY

The aim of this report is to inform the management of Shimano and the OTC department about the performance of the order fulfillment process (OFP) at the OTC department and to provide suggestions for improvement. In this management summary I will summarize the main findings, which are described in more detail in the remainder of this report. I will first give a short introduction to the OFP, then I will discuss the performance of the OFP, and at last I will provide suggestions to improve the performance of the OFP.

The order fulfillment process refers to all of the activities performed by the account back-up department. Broadly, this process includes activities such as the administration of customer orders, the release of purchase orders to suppliers, the confirmation of sales orders to customers, the administration of shipments, the release of stock-orders, and the release of invoices and shipping documents to customers. These activities are performed to activate the supply of goods, in order to satisfy customer demand. Essentially, the activities performed by the account back-up department are the extension of the sales function of OTC.

It was found that the performance of the OFP is dissatisfying several stakeholders, because ten percent of the invoices are incorrect, outputs are delivered too late, and the productivity level of account back-up officers is subject to constraints. Since OTC is growing rapidly in terms of sales, it is necessary to find out what is causing these performance deficiencies in order to correct these problems. After all, if sales are increasing without corrective adjustments in the OFP, expectations are that performance will aggravate. For that reason, I have performed an analysis to find out what is causing these problems.

It turns out that the primary causes for the performance problems are the ERP system (EnterPrice1) and the division of work (how tasks are divided among employees). First of all, the ERP system is incapable to support the requirements of the OFP, because (1) it cannot store product sales prices appropriately, (2) it is not possible to process cross-dock shipments (ex-works) according to their actual progress, (3) it is not possible to modify orders efficiently, and (4) it is not possible to process split orders efficiently. As a result, the limitations of the ERP system cause many incorrect invoices, and diminish the productivity of the account back-up officers because they have to cope with a system that is not adapted to their needs. The reason why the ERP system does not meet the requirements of the OFP is because it was implemented to meet organization-wide (Shimano Europe) requirements, not the requirements of OTC only. Shimano Europe has failed to successfully reconcile the technological imperatives of the ERP system with the business needs of OTC.

The division of work is said to be inadequate, because the available capacity (3.5 FTE) is allocated to different product segments. That is, 1.5 FTE process orders for the PRO segment and 2.0 FTE process orders for the Shimano segment. This type of work division obscures the possibility to shift capacity where it needed most urgently. Moreover, this type of work division is particularly sensitive to sudden increases in demand (required capacity) and supply (available capacity). Consequently, work division according to output causes ineffective use of capacity, thereby restraining the productivity of employees.

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So in order to improve the performance of the OFP it is necessary to align the ERP system’s capabilities with the OFP requirements and to improve the division of work. With regard to the ERP system, the most important improvement suggestion is to make it capable to store product sales prices appropriately, because it will increase the amount of correct order entries, and thus the quality of invoicing and the productivity of the workforce. Secondly, it is important to make the system capable to process ex-works orders according to their actual progress, because it enhances the controllability of order flows and the traceability of products. Both of these improvements are needed to implement the third suggestion, which is to obtain orders via SOD (Shimano Order Direct). This is an add-on to the ERP system that allows customers to enter their orders directly into the ERP system, without the intervention of sales managers and account back-up officers. Using this function improves the dependability of the OFP and the productivity of the workforce. The last ERP-related improvement suggestion is to make it more flexible, such that orders can be modified easily and that split order can be processed efficiently. This will improve the productivity of the workforce, as the system is more cooperative rather than constraining.

With regard to the organization structure, I suggest that management should consider to redesign the way tasks and responsibilities are divided among the account back-up officers. Work may be divided according output (current situation), function, or customer. If it is decided to maintain the current structure, attention should be focused on the employability of capacity (making it more flexible), and the controllability of the order flow, because these are main disadvantages of work division according to output. If it decided to structure work according to function (each officer performs a part of the OFP, independent of product segment), attention should be focused on how information is exchanged between the different officers. And if it is decided to structure work according to customer (each officer is responsible for the fulfillment of a fixed set of customers), attention should be focused on communication with suppliers and the controllability of the order flow. Personally, I would prefer to structure work according to function, because it improves the flexibility of capacity, task specialization, order flow controllability, and defined responsibility. These criteria are explained in more detail in section 5.2.

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1. INTRODUCTION

This paper outlines the results from my research project on the performance of the order

fulfillment process at Shimano’s OTC department. Management initiated this project because

they are concerned about the current performance of the fulfillment of customer orders at the OTC department. Their objectives are to gain more understanding about the process, its performance, and to obtain suggestions for improvement.

In this chapter I will introduce the organization, Shimano Benelux, the OTC department, and the order fulfillment process (OFP). The introduction is written from a top-down perspective, and most of the attention has gone to describing the OFP within the OTC department, because this is the central process for this study. The remainder of this paper is outlined as follows (see figure 1.A).

In chapter two I will define the research problem in more detail, including the initial management question, a problem analysis, and the associated research questions. In chapter three I will describe the research design, which includes a conceptual representation of the problem, a description of the research strategy and the research methods used to gather the required data. In chapter four I will describe the actual problem analysis, which provides the answers to each of the research questions. Ultimately in chapter five I will explain which changes are needed to improve the performance of the OFP at OTC.

FIGURE 1.A Structure of this report

Research design

Conceptual model Research strategy Data gathering strategy

(CHAPTER 3) Introduction

Introduction to organization, department,

and central process

(CHAPTER 1)

Data analysis and interpretation (CHAPTER 4) Suggestions for improvement (CHAPTER 5) Data gathering Problem definition Define management question, organizational

problem, and research questions

(CHAPTER 2)

1.1

Introduction to the organization

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FIGURE 1.1.A Organization structure

Shimano Inc.

Shimano

N. America Shimano Asia

Shimano Europe Shimano Australia ……. Shimano France Shimano Nordic Shimano Benelux Shimano Poland

Marketing Sales Purchasing OTC

Fishing

Shimano Europe Holding includes several companies to which it provides facilitating services including warehousing, ICT, finance, general affairs, and HRM. These companies are divided among two divisions: the “bicycle parts & accessories division” and the “fishing tackle division”. For this research project, only the bicycle parts & accessories division is relevant. This division includes Shimano Benelux, France, Nordic, Poland, and Europe BV. These are so-called Shimano-owned distributors, which are responsible for the supply of merchandise to bike factories, wholesalers, and retailers within their national boundaries. Other European countries are supplied by independent distributors.

Shimano Benelux (SBX) is the largest company within its division in terms of net sales. As a Shimano-owned distributor, SBX is responsible for generating sales (sales function), managing inventory (purchasing function), and acquiring market knowledge (marketing function). Additionally, SBX includes the OTC department, which is responsible for the product development and sales of a selected range of products. In fact, OTC is a company by itself that might as well function separately from SBX. This is because OTC operates independently in a completely different market than SBX. The market for SBX is limited to the Benelux (mainly retailers and bike factories), while OTC sells products around the world to various distributors (including SBX) and bike factories.

1.2

The OTC department

OTC is an abbreviation for “over the counter”, which basically refers to the fact that most of the product segments are destined for the aftermarket (including Shimano shoes, cycling wear, eyewear, workshop, and spare parts). These products are developed internally, and are sold to all Shimano owned and independent distributors within the European market. Additionally, OTC develops yet another product segment (PRO) completely in-house, and these products are being sold globally. To realize all this, OTC includes several functional areas as depicted in figure 1.2.A.

Product Management

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segments. PRO requires more development efforts, because it is completely designed from scratch whereas Shimano products are only partially redesigned.

FIGURE 1.2.A Organization structure OTC

OTC Manager Product management PRO Sales Product Management Shimano Account Back-up 1 FTE

3 FTE 5 FTE 2,5 FTE 3,5 FTE

Sales

Sales comprises of three sales managers, each of which is allocated to a fixed group of customers. Customers of OTC include European distributors for Shimano products, and global distributors (and bike factories) for PRO products. Orders from customers are generated periodically on pre-established dates, depending on the product segment (e.g. shoes can be ordered monthly; cycling wear twice per year). Currently, these orders are communicated via standard spreadsheets, which are developed and supplied by the sales team. These order sheets are subsequently processed by Account Back-up.

Account back-up

Account Back-up is responsible for the fulfillment of customer orders. This includes activities such as order entry, releasing purchase orders, confirming orders, and invoicing. The greater part of customer orders are purchased once orders are generated (purchase to order). A small part is delivered from stock. This means that the officers in account back-up maintain close contact with suppliers. For that matter, these officers are allocated to a fixed product segment. Two officers take care of order fulfillment for the Shimano segments, and two officers take care of order fulfillment for the PRO segment.

OTC supply chain network

To get a better understanding about the position of OTC in the supply chain and the actual flow of goods and (order) information, it is useful to draw a supply chain network (SCN). “A SCN is a network of business entities involved, through upstream and downstream links, in the different processes and activities that produce physical goods or services to customers” (Lin and Shaw, 1998: 200). Figure 1.2.3.A depicts the SCN in which OTC operates and indicates relationships with some suppliers and customers.

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FIGURE 1.2.3.A:

The OTC Supply Chain Network

OTC SPL Singapore Ideation Taiwan Mao Lin Taiwan Supplier Supplier Supplier Retailer Retailer Retailer SBX Benelux SFCC France Paul Lange Germany Consumer Consumer Consumer Flow of goods Flow of order information

1.3

The Order Fulfillment Process at OTC

It is useful to explain the OFP from an operations perspective. Slack et al. (1998: 10) explains that all operations are basically input-transformation-output (IPO) processes. The IPO model that reflects the OFP at OTC is depicted in figure 1.3.A.

FIGURE 1.3.A

The IPO model for the OFP at OTC

Input transformed resources

Customer orders

Input transforming resources

Staff ERP system INPUT TRANSFORMATION PROCESS OUTPUT Services Activation of product supply Invoice & shipping

documents FOB-shipments

EXW-shipments STO-stipments

Adapted from Slack et al. (1998: 10)

The left side of this figure depicts the main resources that go into the transformation process. Slack et al. (1998: 11) classifies these inputs as input transformed resources and input

transforming resources. Input transformed resources include those resources that are treated,

transformed or converted. In the OFP, these inputs include customer orders. These orders are obtained from regular customers, but also from product managers and marketing managers. Input transforming resources include those resources that act upon the transformed resources. The most important transforming resources in the OFP include the staff and the ERP system. These inputs are used in the transformation process to act upon customer orders.

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treated from the point where customers place orders, until the point where customers receive invoices. Products are supplied in three different ways. Some products are shipped directly from the supplier to the customer (Free On Board = FOB), some products are supplied via a temporary intermediate storage point (Ex-Works = EXW), and some products are delivered from stock (Stock = STO). Each of these delivery strategies, and their implications on the OFP are specified in the flow diagrams and narratives.

The main outputs of the OFP include documents that activate the supply of ordered goods (purchase orders), and documents that enable the customer to get these goods to the required destination (invoice and shipping documents). The actual production of goods is excluded from the OFP, because it is outsourced to suppliers. Only the administrative activities are included in the OFP at OTC. This is why the OFP is typified as a service operation in which information, not material, is being processed. The OFP transforms customer orders into

activated supply and supporting documents.

Flow diagrams & Narratives

Customers obtain order sheets from sales managers prior to any order run. These order sheets are used to communicate the customers’ periodic demand. Customers are expected to release their orders on or before a pre-established order deadline. These deadlines are communicated to customers far in advance, and sales managers are responsible to look after the realization of this deadline. Once the orders are obtained, each sales manager checks the content of the orders. If any mistakes are detected, the sales manager will contact the customer to correct it. The correct order will then be passed on to the account back-up officer.

The Account Back-up officer who is responsible for the related product segment will use the order sheets for the data upload to the ERP system. Before each upload, the order is split up into three different pre-defined subsets; one set of products for Free-On-Board (FOB) shipments, one set for Ex-Works (EXW) shipments, and one set for Stock-Order (STO) shipments. Each of these different shipment types require separate uploads so that each batch receives different order numbers. After order entry, the OFP is carried out in different ways, depending on the type of shipment. Table 1.3.A indicates which shipment types are used for each product segment, and how many regular order runs each segment has.

TABLE 1.3.A

Shipment types per product segment

Shipment Product segment

FOB EXW STO Order runs /

year

Shimano shoes x 12

Shimano eyewear x x 4

Shimano cycling wear x 2

Shimano work shop x 12

PRO x x 10

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The OFP for FOB shipments (direct shipments)

FOB shipments are the most commonly used type of shipments. FOB shipments are used for Shimano shoes, Shimano eyewear, and PRO. The Actor Activity Diagram (AAD) in figure 1.3.B depicts the process flow, the actors involved, and how the ERP system is used to support the OFP for FOB shipments. Once the sales managers have checked the customers’ orders, the Account Back-up officers perform uploads from the order sheets to the ERP system.

FIGURE 1.3.B:

Actor Activity Diagram (AAD) for Free-On-Board (FOB) shipments

Customer Sales manager Account back-up

officer Supplier Financial officer Information system

Check order Enter sales order ERP-system SD520/560 OD220/300

Print and check purchase order & order confirmation Approve purchase order confirmation ERP-system OD300/370 Create

consignment ERP-systemOD370/400

Purchase order Purchase order confirmation Shipping documents & invoice Confirm direct delivery ERP-system SD560/580 OD400/999

Print invoice ERP-system

SD580/620 Invoice (receivable) Invoice (Payable) Order Order PRODUCTION

DISTRIBUTION FROM SUPPLIER TO CUSTOMER

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When all the orders are uploaded into the ERP-system, the account back-up officer prints out the purchase orders for each supplier, as well as the order confirmations for each customer. The ERP-system generates both documents automatically. Next, all documents are compared with the original customer orders manually, and any potential deviations are corrected in the ERP-system likewise. Within two days after the customer order receipt date, the purchase orders must be send to the suppliers to allow them to check the order and to plan production. Within the following five working days, the manufacturers are expected to confirm the orders. Subsequently, the Account Back-up officers confirm the orders to the customers and approve the order confirmations in the ERP-system. From this point onwards, the production process starts at the manufacturer/supplier.

The OFP is reactivated when production is finished, and when the shipping documents (bill of lading, certificate, and packing list) and the invoices (payable) are received from the suppliers. By receiving these documents, the transfer of ownership (supplier Æ OTC) is realized. The officer checks the invoices on amounts and prices by comparing it to the initial purchase orders. The invoice is then used to create a consignment in the ERP system, which means that all the products on the invoices are upgraded to a higher status code in the ERP system. The invoices (payable) are then send to the Finance department, and the Account Back-up officers make the invoices (receivable) for the customers. For that matter, the Account Back-up officer confirms the actual delivery in the ERP-system and prints out the invoices. The invoice is then send to the customer, together with the shipping documents. From that point, the transfer of ownership (OTC Æ customer) is realized, and the OFP for FOB shipments is completed.

The OFP for EXW shipments (indirect shipments)

EXW shipments are basically cross-dock shipments – combined orders are received from suppliers and redistributed in a warehouse (Nunspeet) to different customers. This type of shipment is used for PRO and Shimano cycling wear orders. Figure 1.3.C depicts the AAD diagram for this type of shipment.

All the activities prior to production are equal to those described for FOB shipments. That is, order receipt, order entry, purchase order release, sales order confirmation, and purchase order confirmation. These activities are therefore excluded from the AAD diagram.

The process differs once the orders are produced and prepared for shipment. After all, from this point onwards the products are shipped towards the central warehouse in Nunspeet instead of the customer. The suppliers send the shipping documents and the invoices to the responsible Account Back-up officer (transfer of ownership from supplier to OTC). When these documents are received, the Account Back-up officer compares the invoices to the original purchase orders, and makes consignments in the ERP system. The shipping documents are send to a contracted forwarder, who is responsible for the transportation and importation of goods from the destination port to the central warehouse in Nunspeet.

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FIGURE 1.3.C:

Actor Activity Diagram (AAD) for Ex-Works (EXW) shipments

Customer Account back-up

officer Supplier Financial officer Information system

Create consignment ERP-system OD370/400 Shipping documents & invoice Confirm direct delivery Print invoice ERP-system SD580/620 Invoice (receivable) Invoice (Payable) PRODUCTION Check invoice Forwarder Warehouse Shipping documents Cargo letter

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The OFP for STO shipments (shipments from stock)

STO shipments are really different from FOB and EXW shipments, because these orders are delivered from stock (warehouse = supplier). Supposedly, only the workshop segment is delivered entirely from stock, and Shimano Eyewear is delivered partly from stock. In reality though, all other segments are delivered from stock as well (although more sporadically). This is because some products end up in stock for some reasons. The AAD diagram for STO shipments is depicted in figure 1.3.D.

The process for STO shipments is rather simple. The customers place orders, the sales managers check the orders, and the Account Back-up officers enter the orders in the system and confirm the orders to the customers. Till so far, these activities are nearly equal to those discussed for FOB and EXW shipments. The only difference is that these orders are uploaded under the stock order program in the ERP system, instead of the direct shipment program. The orders are picked from stock when the officer approves the shipment in the ERP system. This signals the warehouse to start picking the orders and to prepare the shipments. During the picking process, the status code is changed automatically, thereby signaling the Account Back-up officer when the orders are ready for shipment. The officer then makes the invoices (receivable) and sends them to the customers (transfer of ownership). At last, a signal is given to the warehouse to distribute the orders.

FIGURE 1.3.D:

Actor Activity Diagram (AAD) for Stock Order (STO) shipments

Customer Sales manager Account back-up

officer Warehouse Financial officer Information system

Check order Enter sales order ERP-system SO520/527 Order Order

Print & check order confirmation

Order confirmation

Approve shipment ERP-system

SO527/545

Pick order ERP-system

SO545/580

Print invoice

Invoice (receivable)

DISTRIBUTION WAREHOUSE TO CUSTOMER

ERP-system SO580/620 Signal – shipment prepared Signal – prepare shipment

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2. PROBLEM

DEFINITION

The OTC department has grown rapidly in terms of sales over the past few years, and it is expected to grow even more in the future. To deal with this rate of growth, OTC needs an OFP that suits customers’ and other stakeholders’ requirements. Yet currently, management believes that the OFP is inappropriate to offer a satisfying level of performance. Incorrect invoices, and late purchase order releases are some examples why management is concerned about the current performance level. Given the strategic objective to increase sales by 39% in 2010 (compared to 2007), management believes that account back-up is ill prepared to support this level of sales. As a result of these problems, management now wants to understand the root causes for the lack of performance. Ultimately, management is interested in those interventions that will improve the performance of the OFP. The management question is therefore formulated as follows.

Management question:

How should the OTC department improve the performance of the OFP?

To answer this question, it is first important to understand what is going wrong in the current OFP, and what is causing the performance deficiency. In the section below, I will explain the current performance of the OFP in more detail. Doing so, it will become more obvious what the main problems are in the current situation.

2.1 Performance

analysis

In itself, it is difficult to make a statement about performance, because it is unclear what is exactly meant by performance. Therefore, many academics and practitioners segregate performance into different performance dimensions. Slack et al. (1998), and Slack and Lewis (2001) for example distinguish between quality, speed, dependability, flexibility, and cost as five different performance dimensions on which companies may choose to compete. On a more detailed level, Ahire and Waller (1994) and Waller, Woolsey and Seeker (1995) distinguish between reliability, conformance, robustness, serviceability, flexibility, performance, and features to explain the performance of a business process.

To explain the performance of the OFP, I apply the five performance dimensions from Slack et al. (1998) and Slack and Lewis (2001), because these performance dimensions are generic and thus applicable to a wide range of business processes.

Quality

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TABLE 2.1.1.A

Credit notes from November 1, 2007 till November 1, 2008

Segment Number of invoices Number of credit notes Percentage

PRO 979 66 6.7 % Shoes 382 52 13.6 % Cycling Wear 83 31 37.3 % Eye Wear 96 12 12.5 % Work Shop 97 4 4.1 % TOTAL 1.637 165 10.1%

Incorrect invoices are very inconvenient for customers because it increases the customers’ administrative efforts. For OTC, incorrect invoices are also very inconvenient, because it requires rework on unexpected moments.

Speed

Speed refers to the amount of time between the beginning of an operations process and its end. In case of the OFP, it is difficult to say how much time each activity consumes, because processing times are highly variable. Moreover, it is difficult to judge processing times, because there is no available benchmark.

However, the responsiveness of the order entry process can be illustrated. To understand how much time it takes between the official customer order deadline and the order entry process, two product segments are investigated (Shimano shoes and PRO). These are the most important product segments for OTC in terms of net sales. It turns out that in most cases, both the orders for PRO as well as for Shimano shoes are structurally entered into the system too late. On average, it takes 4 days to complete the order entry phase for PRO orders, and it takes 23 days to complete the order entry phase for Shimano shoes. Responding to customer orders quickly is very important to speed up the OFP, because one day lost in the order entry process means one day lost in production. After all, official purchase orders cannot be released to suppliers before the order is entered into the ERP system.

Unfortunately it is impossible to conduct the same kind of analysis to measure the responsiveness of invoicing, because there is no point of reference. However, sales managers argue that customers complain about late invoices repetitively, thereby restraining the possibility to ship the goods from the supplier to the customer.

Dependability

The term dependability is used here to mean keeping delivery promises – honoring the delivery time given to customers and suppliers (Slack and Lewis, 2001). Several promises are made between OTC and customers and between OTC and suppliers. One of these promises is to release purchase orders to suppliers within two days after the customer order deadline. This promise is hardly ever kept, as I have explained in the previous performance dimension. After all, it takes about 4 days before PRO orders are entered into the ERP system and it takes 23 days before Shimano shoes orders are entered into the ERP system. So, by definition it is impossible to release official purchase orders within the established two days.

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Flexibility

Flexibility comes in four different types. However, for the OFP the most relevant type of flexibility is delivery flexibility – the ability to change planned orders. According to most people in the organization, Account Back-up provides a lot of delivery flexibility. The customer may ask to change the type of shipment for an order (e.g. EXW instead of FOB), or to modify the original order quantity (e.g. 40 items XYZ, instead of 50). Changing an order imposes a lot of rework for Account Back-up. In some cases, the original order must be deleted and reentered into the ERP system to make the required change. Since there are no clear guidelines on which requests to accept, and which not, every possible effort is made to please customer requests.

One may argue that OTC is performing particularly well on this performance dimension, because every reasonable request from the customer is fulfilled. On the other hand, providing much flexibility restrains the performance of the OFP in other areas, such as speed or cost.

Cost

The cost dimension of performance refers to the amount of financial resources needed to keep operations running. Slack and Lewis (2001) refer to this performance dimension as the most important one for every organization. After all, saving cost directly adds up to the year-end financial performance of an organization. Every euro removed from an operation’s cost base is a further euro added to its profits.

For the OTC department, cost is a very important performance dimension. The main cost type associated to the OFP, is the cost of personnel (Account Back-up). Consequently, improvements in the productivity level of Account Back-up officers are considered as the main potential source of cost reduction. In the current situation, some people argue that there is a serious productivity problem.

2.2 Research

questions

The performance analysis supports the argument that the OFP performs inadequately. The most relevant problems include the quality of invoicing (Quality), the lateness of deliveries

(Dependability), and low productivity (Cost). Continuing to use the current OFP, while

increasing sales, is not a good option. It will inevitably lead to more incorrect invoices, late deliveries, and low productivity levels. To intervene this trend, it is important to find the root causes for each of these performance problems. The first research question is therefore:

Research question 1:

What are the main causes for the problem areas quality, dependability, and cost in the OFP?

Ultimately, the objective of this study is to provide suggestions for improvement (hence the management question). The second research question is thus:

Research question 2:

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3. RESEARCH

DESIGN

According to Kerlinger (1986: 279), a research design is a plan of investigation so conceived as to obtain answers to research questions. It is a blueprint to explain how further research will be carried out, including a conceptual analysis, a description of the research strategy, and the research methods used to gather data (Van der Velde, Jansen, and Anderson 2004; Cooper and Schindler 2003). Below, each of these research design features will be further elucidated.

3.1

Conceptual analysis

A conceptual analysis is a type of examination in which different concepts are related to given problems. These concepts are based on literature. The concepts used for this conceptual model stem from the operations strategy matrix from Slack and Lewis (2001: 56) (see figure 3.1.A). They define several decision areas that may affect the performance of an operation, including capacity, supply network, process technology, and development and organization. Capacity refers to the amount of transforming resources, which are needed to achieve a particular level of activity or output; supply network refers to the design of the supply chain network (as depicted earlier); process technology refers to the equipment used in the operation; and development and organization refers to organization structure in which the day-to-day activities take place. These concepts are called decision areas, because each of these concepts can be changed in order to affect performance (e.g. increasing capacity may improve the speed of an operation).

Figure 3.1.A

The operations strategy matrix

Per fo rm a nc e obj ec ti ve s Quality Speed Dependability Flexibility Cost

Capacity Supply network Process technology Development and organization X X Decision areas X X X X

Adapted from Slack and Lewis (2003: 56)

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Adequacy of the ERP system

As explained in the introduction, one of the prime transforming resources used in the OFP is the ERP system. Each customer order is administrated in the ERP system to keep track of its progress. An important question to ask concerning this ERP system is thus whether it functions well enough to successfully facilitate in the OFP. Or better, does the ERP system capabilities match the OFP requirements?

FIGURE 3.1.B Conceptual model

QUALITY

DEPENDABILITY

PRODUCTIVITY

Adequacy of the ERP system Amount of workload Adequacy of work division + + -+ + -1 2 3 4 5 6

Many academics argue that ERP systems provide general solutions to specific business process (Davenport 1998; Morton and Hu 2008), resulting in a misfit between process requirements and an ERP system’s capabilities (Soh and Kien 2000). This concept is depicted in a simplified manner in figure 3.1.C. The figure illustrates that some of the OFP requirements cannot be provided by the ERP system, and reversely, that some of the ERP system’s capabilities are not (yet) exploited by the OFP.

FIGURE 3.1.C

Degree of fit between OFP requirements and ERP capabilities

OFP

requirements ERP systemcapabilities FIT

MISFIT

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SQ 1: How does the adequacy of the ERP system affect the quality of the OFP at OTC? SQ 2: How does the adequacy of the ERP system affect the productivity of the account

back-up officers?

Amount of workload

The amount of workload refers to the relation between the available capacity and the required capacity. For any organization it is important to find a good balance between these types of capacity. The problem is, however, that both the available and required capacities fluctuate from time to time. This may lead to situations where workload levels (temporarily) rise considerably. Much research has been done on situations in which people have to function under high levels of workload. Grasha and Schell (2001), and Schaufeli and Bakker (2007), amongst others, argue that whenever people experience high levels of workload, the chance of making mistakes also increases. Furthermore, if workload increases to extreme levels (overload), it is by definition impossible to complete work within the established time. So basically, the amount of workload is expected to have an influence on both the quality and dependability dimension of performance. The following research sub-questions have therefore been formulated:

SQ 3: How does the amount of workload affect the quality of the OFP at OTC? SQ 4: How does the amount of workload affect the reliability of the OFP at OTC?

Adequacy of work division

Work can be divided among employees in many different ways. Mintzberg (1992: 50-55) defines several different ways to divide work. Work may be divided according to output (each employee is responsible for all tasks related to one or more product segments), function (each employee is responsible for a specific set of tasks within a process), customer (each employee is responsible for all tasks related to a specific customer), and more. The way work is divided among employees largely establishes how people behave in a process (Dalton et al. 1980: 49; Meijaard, Brand, and Mosselman 2005: 83). For example, work division according to function enables employees to specialize in a small set of tasks, whereas work division according to output enables employees to perform multiple tasks.

In the OFP, tasks are clearly divided according to output. After all, 2.0 FTE (Full-Time Equivalents) are responsible for the fulfillment of customer orders in the Shimano segment (output = Shimano shoes, cycling wear, eyewear, and workshop), and 1.5 FTE are responsible for the fulfillment of orders in the PRO segment. The main question is of course whether this kind of work division is appropriate given the unique operations characteristics, and how it affects the performance of the OFP. In the conceptual model, the adequacy of work division is therefore related to the dependability and productivity dimensions of performance. The related research sub-questions are:

SQ 5: How does the adequacy of work division affect the dependability of the OFP at OTC? SQ 6: How does the adequacy of work division affect the productivity of the account

back-up officers?

Further research questions

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SQ 7: How should each of these causes be changed to improve the performance of the OFP at OTC?

Below I will explain how further research is planned to gain answers to each of these research sub questions. I will discuss which research strategy is most appropriate for this study, and which research methods are used in the investigation.

3.2 Research

strategy

Several different research strategies are available in business research including surveys, theoretical research, experiments, case studies, and more (Yin 2003; Van der Velde, Jansen, and Anderson 2004; Cooper and Schindler 2003). The applicability of each of these research strategies depends on specific research characteristics. Surveys, for example, are most useful when results are to be generalized to a larger population (e.g. opinion polls). Other research strategies, such as experiments, or case studies would be inapt for this purpose.

Two different classification schemes are developed by Van der Velde, Jansen, and Anderson (2004) and Yin (2003), to explain which research strategy is most appropriate for a given research objective (see figure 3.2.A and table 3.2.A). The first classification scheme explains two variables on which to decide which research strategy is most appropriate. These variables are (1) the degree to which the researcher intervenes during the research process, and (2) the degree to which the outcomes must be generalized to a larger population. Based on these variables, case study seems to be the most appropriate research strategy for this particular study. After all, the degree of intervention during the research process is medium (1), and the outcomes do not have to be generalized to a larger population (2) – the results are useful for OTC only.

FIGURE 3.2.A

Classification of research strategies 1

Laboratory experiment Evaluation tasks Experimental simulation Field test

Survey Case study

Theoretical research Computer simulations SPECIFIC GENERAL NO INTERVENTION INTERVENTION

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When adopting the classification scheme from Yin (2003), this also yields “case study” as the most appropriate research strategy. According to Yin (2003), three different variables lead to the selection of the right research strategy. First is the nature of the research question (explorative or explanatory). In this study we want to explain the relationships between cause-and-effect. Second is the question whether or not control can be exerted over events, which is somewhat equal to the degree of intervention from Van der Velde, Jansen, and Anderson (2004). In this study, it is not possible to exert control over events (as in experiments). The third question is whether the study is focused on contemporary or historical events. Certainly, this study is focused on current events.

Table 3.2.B

Classification of research strategies 2

Research strategy Research question Control over events

Contemporary events

Experiment How, why Yes Yes

Survey Who, what, where, how much No Yes

Archival analysis Who, what, where, how much No Yes / No

History How, why No No

Case study How, why No Yes

Adapted from Yin (2003)

Case studies are particularly useful when the aim of the research is to conduct an intensive study of a phenomenon (bad performance) within the total, natural surroundings (OTC’s OFP). The most important characteristic of a case study is that it systematically describes a single case, thereby using multiple data collecting research methods. Below I will explain which research methods will be used to answer each of the sub questions from the previous sub-section.

Research methods

There are numerous research methods that can be used when doing a case study. Among the most relevant research methods are questionnaires, interviews, and secondary data analysis (Cooper and Schindler 2003; Welker and Broekhuis 2008). Questionnaire is the most suitable research method when large groups of individuals have to be studied in a short time. Interviews are more suitable for smaller groups of individuals, and are particularly useful when the aim is to release their knowledge about a certain phenomenon. Secondary data analysis refers to the collection and analysis of existing material.

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4. PROBLEM

ANALYSIS

In this section, I will present the results from the analysis. Each of the first six research sub questions will be discussed here in the same order as in the previous section. I will explain which findings were obtained during the investigation process, and how these findings are interpreted in relation to the research sub questions.

4.1

Adequacy of the ERP system

In the conceptual analysis it was explained that a gap between process requirements and an ERP system’s capabilities results in a certain degree of misfit (see figure 3.1.B). In this section I will explain how this theory of misfit applies to the situation of the OFP, and how this affects the quality of outputs and the productivity of the account back-up officers during the fulfillment of customer orders. I have interviewed several account back-up officers to understand which kinds of misfit are present. During these interviews it became obvious that the ERP system has a number of imperfections compared to the OFP requirements. To reveal this gap it is useful to display these requirements and capabilities first (see table 4.1.A). Each of these misfits will be discussed in more detail in the sections below (in the same order as in the table below).

TABLE 4.1.A

Concept of misfit applied to the OFP

OFP requirements ERP system’s capabilities

Efficient order entry process (fool-proof) Inefficient order entry process (error-sensitive)

EXW shipments should be managed in the ERP EXW orders are treated as FOB shipments in the ERP system Simple modification of administrated orders Difficult to modify administrated orders

Efficient consignment process Time-consuming consignment process

Order entry process

According to Croxton (2003: 27-28), the order entry process should be simplified as much as possible and potential errors should be eliminated because they can be very costly. However, the order entry process at OTC is very inefficient, because it requires a lot of interaction from account back-up officers and because it is very sensitive to incorrect order entries. One analysis (see appendix 1) revealed that 16% of all order entries are cancelled and reentered, because the initial order entry was incorrect. The example below illustrates this:

The March 2008 order run for Shimano shoes was initially entered into the ERP system on January 2, 2008. The complete order entry was cancelled on January 23, because the sales prices turned out to be incorrect. All orders had to be reentered once more on January 23.

During the order entry process, account back-up officers make an upload from the customers order sheets to the ERP system. During these uploads, the item numbers, order quantities, item prices and landed cost rules1 are uploaded from the customer’s order sheets into the ERP system. Item prices are entered into the ERP system, because the ERP system cannot store

1

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these prices appropriately. So instead of administrating how much of each product is ordered, sales prices have to be added to each order line entry as well. This, in turn, increases the risk of an incorrect upload. After all, if the attached sales price is incorrect so is the order entry.

EXW shipments

In the ERP system it is not possible to distinguish between FOB and EXW shipments, while these processes are really different. Each EXW shipment is uploaded as an FOB shipment and treaded likewise. The only difference is that EXW shipments have a landed cost rule that differs from an FOB shipment. The problem resulting from this procedure is that the ERP system does not reflect the actual progress of an EXW shipment. Once the goods are delivered at the warehouse in Nunspeet, the administration in the ERP system indicates that the order is delivered to the customer (confirm delivery – status code SD560-580). This is problematic for control purposes.

Modifying orders

Account back-up officers argue that it is very difficult to modify an order once it is entered into the ERP system. If, for example, a customer wants to change the shipment type for a particular order (EXW instead of FOB), then the original order (line) must be canceled and reentered completely. Instead, it would be helpful if the ERP system could provide more flexibility to these kinds of changes. After all, OTC wants to be flexible towards their customers. In other words, the OFP requires efficient modification of administrated orders, but the ERP system is incapable to provide this level of flexibility, resulting in a productivity loss among account back-up officers.

Making consignments

The fourth kind of misfit between the OFP requirements and the ERP system’s capabilities relate to the consignment process. Consignments are made when products are finished. They are based on the supplier’s commercial invoice, which declares which products are completed. The main complaint from account back-up officers is that the ERP system is not capable to upgrade order lines partially. This feature would be very desirable, as in many cases orders are delivered incompletely (20 items XYZ are finished, while 30 items XYZ were ordered). To deal with this situation, account back-up officers have to return to the order entry process – split the order in two or more suborders – before the sub delivery can be processed. Instead, it would be very desirable if the account back-up officer could just type in the actual delivery quantity.

Discussion

The analysis reveals that the ERP system certainly has an influence on the quality of invoices. This is primarily because sales prices (and currencies) have to be entered into the ERP system at the beginning of the OFP - during order entry – which is very sensitive to errors. If incorrect sales prices are entered into the ERP system and remain undetected, these prices will ultimately return on the invoice. The analysis in appendix 2 illustrates that incorrect sales prices are the second largest cause for incorrect invoices. Over 21% of all incorrect invoices are wrong because the sales prices are wrong – a consequence of the ERP system’s incapability to store sales prices.

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processing of split orders. In all of these cases, the account back-up officer must return to the beginning of the process to make the required change happen.

Basically, the ERP system supports the OFP perfectly, only when orders are administrated correctly the first time, when no modifications have to be processed, and when product deliveries are always complete. However, the environment in which the ERP system operates requires a more flexible approach to filling customer orders efficiently, as illustrated.

The gap between the OFP requirements and the ERP system’s capabilities can be explained as follows. Since OTC is part of a much larger entity (Shimano Europe), the ERP system is used among the entire organization. When the ERP system was implemented in 2005, enterprise-wide requirements were taken into consideration - certainly not requirements from OTC only. This has resulted in a situation where the ERP system does not entirely fit the needs of the OTC department. From OTC’s point of view, “the company (Shimano Europe) has failed to reconcile the technological imperatives of the ERP system with the business needs of the organization (OTC) itself” (Davenport 1998: 122).

4.2

Amount of workload

In the conceptual model it was depicted that workload is assumed to affect the quality of invoices and the dependability of deliveries. That is, if the workload for account back-up officers increases to a higher level, the quality of the invoices and the dependability of deliveries decrease. Testing these relationships is difficult, mainly because it is hard to recognize when workload is high.

To test the relationship between the amount of workload and the quality of invoices, I have compared the amount of incorrect invoices over two different periods. In the first period, 2.5 FTE were working at the account back-up department. In the second period 3.5 FTE were working at the account back-up department. This 40% increase in capacity is presumed to affect the amount of workload positively. That is because workload is expected to decrease because of the capacity expansion. If the assumption in the conceptual model is right, the overall quality of invoices should increase as a result of the workload reduction. The results from the analysis are depicted in figure 4.2.A.

Figure 4.2.A

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The diagram indicates that the amount of incorrect invoices has not decreased since the capacity expansion in October 2008. Instead, the amount of credit notes increases ever since this period. This is an interesting finding, because it is exactly the reverse of what is expected. It is possible that the new employees cause the increase in credit notes, because they have to learn the job. However, the slope of the line is not flattening as it moves towards the end. It is difficult to discover the actual cause for the increase in credit notes. Given the findings obtained earlier (see appendix 2), it is more plausible to expect that delivery and pricing problems are the cause for incorrect invoices, than it is for workload. During my observations with the account back-up officers I noticed that the officers pay very close attention to accuracy, even when they are very busy. I therefore find it hard to believe that workload is a cause for incorrect invoices. I strongly believe that the analysis above and the credit note analysis in appendix 2 support the argument that workload does not affect the quality of invoices.

The effects of workload on the dependability of deliveries (release of purchase orders, order confirmations, and invoices) are more obvious. During several interviews with the account back-up officers it was mentioned that workload is often too high to complete all the required tasks within the established release dates. Since the increase in capacity (as discussed above) this problem has decreased, especially for the invoicing problem. However, for the release of purchase orders and order confirmations there is still a problem. According to the planning, orders should be entered into the ERP system on Fridays after order reception. As such, it may be expected that sufficient capacity is available on these days. However, it turns out that the available capacity on Fridays is in fact the lowest. This increases the workload for the available officers, thereby restraining their ability to complete the order entry process within the established due date, and thus to release purchase orders and order confirmations on time. Moreover, the timelines of the order entry process is considered as a less relevant target of the OFP. The timeliness of invoicing and delivery of goods are considered as most relevant, because these instants are far more critical for the customer. Based on the interviews with the officers it is concluded that workload affects the dependability of the OFP, and that the order entry process (including the release of purchase orders and order confirmations) is mostly subject to this cause.

Discussion

It was found that workload does not affect the quality of invoices. Invoices are incorrect for different reasons, which are not related to amount of workload. Instead, delivery problems and ERP related problems are the primary causes for incorrect invoices, as discussed in the previous section and supported by the analysis in appendix 2. It was remarkable to notice that since the increase in capacity in October 2008, the amount of incorrect invoices has increased, which is an opposite reaction to what is expected.

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4.3

Adequacy of work division

In the conceptual model it was explained that work division affects the performance of any operation, because it establishes for a large part how people execute their work. In this section I will explain how work is currently divided among the OFP actors (see figure 4.3.A) and how this affects the performance of the OFP in terms of dependability and productivity.

FIGURE 4.3.A

Work division among OFP actors

SBX SFCC PAUL

LANGE SNC MACARIO

SM1 SM2 SM3

SHIMANO PRO

SPL AGS WAREHOUSE IDEATION

CUSTOMER SALES ACCOUNT BACK-UP SUPPLIER MIC GYMS Customer order Internal order Purchase order

Several conclusions can be made when examining this structure. First, work is divided among sales managers according to customer. Second, work is divided among account back-up officers according to output. And third, all actors depend on each other during the order entry process. Each of these findings is discussed below.

Work division among sales managers

Work is divided among sales managers according to customer. Each sales manager is responsible for a fixed set of customers. This kind of work division has been selected because it is very convenient for customers to deal with only one sales representative when doing business with OTC. Moreover, this kind of structure allows sales managers to improve their knowledge about and relationships with these customers. If instead, work would be divided according to output (each sales manager would then be responsible for one or more product segments), customers of OTC would have to deal with several sales managers, which is less desirable. The way work is divided among sales managers is therefore believed to be correct.

Work division among account back-up officers

Work is divided among account back-up officers according to output. Each officer is responsible for the fulfillment of customer orders for one or more product segments. This kind of work division has been selected for the sake of communication. After all, each officer maintains close contact with suppliers during the OFP. Another reason for selecting this kind of structure is to clearly define the tasks among officers. Each officer understands very well that he or she is responsible for the OFP in his or her product segment only.

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different segments tempt to cancel each other out. If demand in one segment is high, this may be offset by a lower demand in another segment (see figure 4.3.B). This concept is referred to as risk pooling (Simchi-Levi, Kaminsky, and Simchi-Levi, 2008: 48).

FIGURE 4.3.B

Combining capacity results better service

Available capacity Required capacity # FTE Mo Tu We Th Fr 2 TIME PRO 1 # FTE Mo Tu We Th Fr 2 TIME SHIMANO 1 # FTE Mo Tu We Th Fr 2 TIME PRO + SHIMANO 1 3 4 PREFERED

The figure illustrates that if the available capacity (blue line) is combined, it allows to better meet the required capacity (beams), thereby providing better service and lowering the workload for account back-up officers.

A second drawback from work division according to output is that responsibilities overlap. In both product segments, two people are responsible for all tasks related to the OFP in that particular segment. Although this clearly defines the boundaries of their jobs, it does not explicitly define the responsibilities for each individual. As such, it requires mutual adjustment (who does what and when) and makes it more difficult to measure individual performance. The third disadvantage of work division according to output is the lack of transparency during the processing of customer orders. In the current situation, customers’ orders move to a single desk where all operations are being carried out from start till end. If instead, the customer orders would flow through the department as it progresses, it would be more transparent where potential bottlenecks originate.

Inter-dependability

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Discussion

The presumption that work division affects the performance of the OFP in terms of dependability is supported by the analysis. Purchase orders and order confirmations are late, because each actor depends too much on each other during the start of the OFP. Customers, sales managers, and account back-up officers contribute to this problem, because each of these actors cause delay in the order entry process. Invoices are late for a different reason. Primarily, this is because the available capacity is utilized inflexibly. In the current organization structure, each account back-up officer is responsible for the fulfillment of customer orders in one or more segments, and capacity shifting between these “groups” is uncommon. So if workload increases in one segment, additional capacity remains omitted. Moreover the order flow is obscured, which makes it even more difficult to recognize where capacity constraints originate. It is thus believed that invoices are late, because the available capacity is not utilized effectively.

Work division is further believed to affect the productivity of account back-up officers. Evidence to verify this presumption is limited, as each officer is continually loaded with work (productivity is high). However, the question is whether these officers work on the most prioritized job. After all, productivity may be high but capacity does not necessarily have to be utilized effectively. From this perspective, inflexible capacity utilization diminishes productivity, because it obscures the officers from working on the most relevant task. The indistinct order flow furthers this problem even more, because it conceals the orders that need the most attention. So in this sense, work division does affect the productivity of account back-up officers, although it is hard to quantify the actual impact.

4.4

Conclusion

The analysis has revealed some interesting relationships between the different performance dimensions and decision areas. Based on these finding I have constructed an empirical model (see figure 4.4.A), which explains these relationships at a glimpse. Below, I will explain each of these relationships in more detail.

FIGURE 4.4.A Empirical model

QUALITY

DEPENDABILITY

PRODUCTIVITY

Adequacy of the ERP system Amount of workload Adequacy of work division + 2 1 + 3 -4 -5 + + 6 7

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sensitive to mistakes. It was found that over 15% of all order entries are rectified, mainly because of this impediment. Yet, still over 2% of all invoices are incorrect because sales prices are wrong, which requires rework. This is why the adequacy of the ERP system is related to the quality and productivity dimensions of performance in the empirical model (1; 2). Other shortcomings from the ERP system include its incapability to distinguish between EXW and FOB orders, to modify order specifications, and to process order lines partially. These limitations obscure the productivity of account back-up officers even more (2). A third relationship was found, which was not depicted in the conceptual model. This relationship explains that the amount of workload increases, because the ERP system functions inadequately (3). Workload, in turn, affects the performance of the OFP because it causes undependable deliveries. It is found that some purchase orders, order confirmations, and invoices are issued too late because workload is too high (4).

Undependable deliveries (of purchase orders and order confirmations) are further caused by the fact that too many actors are involved in the order entry process. An order typically moves from the customer to the sales representative, to the account back-up officer, before it is entered into the system. If one of these actors delays this flow (which is certainly not uncommon), outputs are delivered too late. Thus the organization structure causes too much inter-dependability’s, which does not benefit the flow of orders (5).

Yet another relationship is between the division of work and the productivity of account back-up officers (6). In the current situation work is divided according to output, which means that each officer is responsible for the fulfillment of orders in one or more product segment(s). As such, officers who process PRO orders do not process Shimano orders (and vice versa). This characteristic does not benefit the productivity of the officers, because it obscures the ability to shift capacity where it is needed most urgently. Additionally this type of work division is sensitive to risk, because if an officer is unavailable for some period (because of illness, vacation, etc.), the available capacity for his or her segment decreases dramatically.

The last relationship found is between the work division and workload (7). Since the available capacity for each segment is restricted to two officers, workload is fluctuating aggressively when demand suddenly increases (required capacity), or when one officer is unavailable for an extended period (available capacity).

Empirical model

The empirical model indicates these relationships, which should be interpreted as follows:

1. If the adequacy of the ERP system increases, the quality of the OFP will improve. 2. If the adequacy of the ERP system increases, the productivity of the account back-up

officers will increase.

3. If the adequacy of the ERP system increases, the amount of workload among account back-officers will decrease.

4. If the amount of workload decreases, the dependability of the OFP will increase. 5. If the adequacy of work division increases, the dependability of the OFP will

increase.

6. If the adequacy of work division increases, the productivity of the account back-up officers will increase.

7. If the adequacy of work division increases, the amount of workload among account back-up officers decrease.

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5.

SUGGESTIONS FOR IMPROVEMENT

Recall from section two and three that the main research question is “how to improve the quality, dependability and cost of the OFP”. In this section I will present several suggestions with the aim to realize these improvements. These suggestions are based primarily on the ERP system and the organizational design. After all, the ERP system and workforce are the main transforming resources belonging to the OFP. It is therefore necessary to align these resources with the requirements of the OFP. In addition, I will explain some more about performance management and why OTC should measure its performance and implement a continuous performance improvement cycle.

5.1

Improvements in the ERP system

To improve both the quality of the OFP and the productivity of account back-up officers, it is necessary to make a number of changes in the ERP system. Since it is impossible to replace the current ERP system in favor of a more suitable package (because the system is used throughout the entire organization), it is necessary to adapt the current system such that it supports the requirements.

Align the ERP system’s capabilities with OFP requirements:

ƒ The ERP system should be able to store product sales prices:

The most relevant change is to make the ERP system capable to store product sales prices appropriately. No longer should sales prices be entered into the ERP system for each order line during the order entry stage. If the ERP system can store product sales prices, it reduces the amount of incorrect order entries (thereby improving the quality of the invoicing). In addition, it reduces a great amount of workload for both sales managers and account back-up officers (thereby improving the productivity of the workforce). This is because less work is involved in producing order sheets for the customers, and because less work is involved in rectifying incorrect order entries and invoices.

ƒ The ERP system should be able to distinguish between FOB and EXW orders:

The ERP system should offer the possibility to enter and process EXW orders according to their actual progress. EXW orders differ from FOB orders, because the products move via the warehouse in Nunspeet and not directly towards the customer. Consequently, the ERP system should be able to administrate when products are send from the supplier to the warehouse, when the products arrive at the warehouse, where the products are located in the warehouse, and when the products are released from the warehouse. This improves the controllability of the process as well as the traceability of the products.

ƒ The ERP system should enable to modify orders efficiently:

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