Lean Fulfillment in Financial Services WCBFs 4 th Annual Lean Six Sigma Summit May 1, 2008, Track I Aaron Bruner, PE Nathan Guerdet Wells Fargo Financial.

Lean Fulfillment in Financial Services

WCBF’s 4th Annual Lean Six Sigma SummitMay 1, 2008, Track I

Aaron Bruner, PE

Nathan Guerdet

Wells Fargo Financial

2

Introducing Wells Fargo Financial – Retail Services

Our financing allows clients such as Slumberland to offer “12 Months No Interest and No Payments”

We maintain clients by funding and servicing their customers’ transactions

We Provide Private Label Credit Card Services for Clients

3

Introducing the Forms Management Department

Documents and forms managed in Des Moines We supply forms to 30,000 retailer locations Paper applications are supplied so that customers can

apply for financing and agree to program terms

Wells Fargo Financial Retailer Services in Des Moines

4

Forms Management –Overview

We have custom applications for over 200 large clients We also provide applications for many industry programs We manage the print, storage, fulfillment and shipping of

all paper documents

Paper Credit Card Application

5

Forms Process Improvement was Necessary

1 to 10 year inventory on hand High scrape rate Too many rush orders – Large re-supply project in early ‘08 Complex ordering process Poor cost management

Pallets of Forms Stored in the Building Basment

6

Process work-out with all team members Build SIPOC Create detailed process flow chart CTQ chart Fishbone diagram Record data Develop vendor selection proposal Roll-out new processes for future state Six sigma control chart Results

Supply Chain Project Steps

7

S.I.P.O.C.

Forms Process From Supplier to Customers

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Detailed Process Flow Chart

Too Many Process Steps

9

Right Sized Inventory

Cycle time

Quality

Cost

•Inventory turns•Decrease process time

•Forecast with 80% accuracy•Less than 10% spoilage

•Limit cost of safety stock•Keep cost of production even throughout the year

Critical to Quality

Measurements Materials People

MachinesMethodsEnvironment

Output

Cause & Effect / Fishbone Diagram

X – Major variable

x – Minor variable

N – Noise (something that can’t be controlled)

Communication between groups is limited.

Within each industry app type, there are different versions for each tier.

High Inventory

levels

XXLow stock notification fromInfo-Plus is “off”

“Fully loaded” cost of producing stock is not taken into consideration.

No disciplined forecasting process

Seasonality for industries causing spikes in usage

It’s “cheaper” to produce larger quantities.

We save money by making fewer shipments to dealers so we send

large quantities.

Sales, Marketing dictates how much supply should

be sent to dealers but don’t pay for shipping or

production

The annex cannot produce 28” apps so larger quantities are produced to accommodate for outsourcing lead time

Info-Plus software is inadequate as an inventory management tool.

XX

X

x

NX

x

x

x

Impact

Implementation

3

1

4

High Low

Easy

Hard

2

Measurements Materials People

MachinesMethodsEnvironment

Output

Communication between groups is limited.

Within each industry app type, there are different versions for each tier.

High Inventory

levels

43Low stock notification fromInfo-Plus is “off”

“Fully loaded” cost of producing stock is not taken into consideration.

No disciplined forecasting process

Seasonality for industries causing spikes in usage

It’s “cheaper” to produce larger quantities.

We save money by making fewer shipments to dealers so we send

large quantities.

Sales, Marketing dictates how much supply should

be sent to dealers but don’t pay for shipping or

production

The annex cannot produce 28” apps so larger quantities are produced to accommodate for outsourcing lead time

Info-Plus software is inadequate as an inventory management tool.

3

1

3

3

4

1

1

1

Cause & Effect / Fishbone Diagram

12

Application demand has increased significantly, but supply process has not adapted

Data Collection

In-house Process Could Not Handle 2 Million Apps

13

In-house supply process

Data Collection

In-house Process

1. Submit order to printer

2. Ship forms to Retailer

3. Store in Retailer basement

4. Send some forms to “Annex”

5. Submit some orders to “Annex”

6. “Annex” send to basement

7. Replenish remaining orders from basement

Poor In-house Fulfillment Process

14

In-house Supply Process

Data Collection

Flooring Retailer Example

1. Retailer submitted 400 apps in ‘07

2. 6 week re-order point 1800

3. Recorded on-hand inventory 4200

4. Actual on hand inventory 40000

i.e.: Demand and Supply Problem Exists

Wasted Supply Building up in Basement

15

2 Outside and 1 Inside Print Vendor 5 Inventory Storage Locations

Supplier & Inventory Locations

Basement6th FloorIn-House Vendor

Vendor 2

Vendor 1

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Currently have 3 print vendors and store the supplies in 5 different locations

Coordinating Pricing, inventorying, billing, reporting, and tracking very difficult and expensive

There are no formal contracts in place to control costs and govern the relationships

High Level Problem Summary

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We need to reduce order-to-delivery cycle time and the overall cost of forms

Need more accurate order and inventory management Need web-based, automated ordering to reduce costs Retailer needs to integrate and enhance its forms supply

chain processes to better align with its strategic direction of JIT supplies while reducing costs

Selection Criteria

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Sent request for proposal to 5 vendors Vendor must have proven advanced technical solutions Must have business leaders who understand and are

committed to providing leading edge solutions Must have cost improvement execution for their

customers Weighted-factor Analysis on many criteria

Vendor Selection

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145 Questions Later….

RFP Q&A Results Show: Score

1. Vendor 2 - Sigler 39.682. Vendor 1 - Stone 39.683. WF A, D, & P group 35.694. FedEx Kinko’s 32.575. In-House Annex 19.49

See Addendum 3 for Q&A

RFP SCORE

Stone Printing39.68

Sigler39.68

WF A, D, & P group35.69 FedEx Kinko’s

32.57

Annex19.49

0

5

10

15

20

25

30

35

40

45

Higher = Better Score

Checklist of NeedsSigler Annex

Web Based Ordering

Web Based Inventory

Real-Time Inventory

Customized Invoicing

Monthly Invoicing Summary

Invoicing by Product or Client

Provide Itemized Reports of Orders

Provide Itemized Reports of Shipments

Provide Itemized Reports of Printing

Will our print jobs be printed by you

Pricing Matrix Results Show:

1. Sigler can provide the online ordering, billing, and inventory tracking that we desire

2. Sigler is very price competitive

3. Shipping costs at Sigler are the same as the Annex

Note: We implemented a UPS Shipping Station utilizing Wells Fargo’s discount at Sigler’s facility

RFP Results

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Total Cost per App

Stone$0.511

Sigler$0.394

Annex$0.289

WF AD&P$0.713

FedEx$0.855

$0.000

$0.100

$0.200

$0.300

$0.400

$0.500

$0.600

$0.700

$0.800

$0.900

Fully Loaded Cost

Cost Of 2,500 Apps To Produce, Inventory, And Ship Within One Year

Without Allocation

21

Actual Industry Program Printing Costs

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

Pre

ferr

ed -

Aut

o

Pre

ferr

ed -

Ele

ctro

nic/

App

lianc

e

Pre

ferr

ed -

Hea

lthca

re

Pre

ferr

ed -

Hom

eF

urni

shin

gs

Pre

ferr

ed -

Jew

elry

Pre

ferr

ed -

Oth

er

Pre

ferr

ed -

Rec

reat

ion

Tot

al C

osts

Sigler Annex

Printing Cost Per Industry

Industry CIT Actual App Print Qty Sigler Annex Money SavedPreferred - Auto 65,000 $4,789.20 $6,971.90 $2,182.70Preferred - Electronic/Appliance 40,000 $2,947.20 $4,290.40 $1,343.20Preferred - Healthcare 75,000 $5,047.50 $6,736.50 $1,689.00Preferred - Home Furnishings 325,000 $21,872.50 $29,191.50 $7,319.00Preferred - Jewelry 100,000 $6,730.00 $8,982.00 $2,252.00Preferred - Other 70,000 $5,157.60 $7,508.20 $2,350.60Preferred - Recreation 30,000 $2,628.00 $4,184.40 $1,556.40

705,000 $49,172.00 $67,864.90Discount if paid w/in 10 days 2%

$48,188.56Cost Per 0.068$ 0.096$

Print Cost Savings $19,676.34Cost Savings 29%

Without Allocation #'s

CIT Quoted Prices

29% Cost Savings

Using Vendor 2

Data Table:

Collect Cost Data by Program

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Vendor Selection

Barcode Ready

(Formscape

compatible)

One Stop Online Orders,

Printing, Storing,

Fulfillment and Shipping Source

UPS Ship Station – Able to use WF

discount and save 33% on all of our shipping

costs ($150,000 annually)

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Using our new preferred supplier as our one print source, we estimate cost savings of over $270,000 in 2008 and an increase in the service we provide our customers

Cost Saving Results

Printing of Apps Orders in 2007

$638,629

$365,196

$9,000$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Vendor 1 Vendor 2 In-house

$'s

Sp

ent

on

Ap

p P

rin

tin

g

Savings of: $273,433

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Price Per Control Chart

(1.00)

(0.50)

-

0.50

1.00

1.50

2.00

0 20 40 60 80 100 120 140 160 180 200

25

Price per App Order

0

10

20

30

40

50

60

70

80

- 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00

Std Dev

Fre

que

ncy

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ROP's

0

20000

40000

60000

80000

100000

120000

140000

160000

App Type

RO

P's

0

50000

100000

150000

200000

250000

300000

350000

Est

imat

es

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Reduce order-to-delivery cycle time Reduce overall costs of forms Reduced cycle time for dealers to go “live” by 95% in Q1

2008 Increase inventory turn times while maximizing print

volume discounts Allows us to track inventory at each dealer location

whereby reducing opportunities for scrap Reconcile invoices much quicker Anticipate our customer needs an become pro-active in

managing them

Results

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Questions