Unapplied Cash Canon Ricoh Credits, Discrepancy in System Project #0307-44-002 Black Belt - Jonathan Williams Division- Service/ Order Entry/Vendor.

Unapplied Cash – Canon & Ricoh Credits, Discrepancy in SystemProject #0307-44-002

Black Belt - Jonathan WilliamsDivision-Service/ Order Entry/Vendor

2

$71.5MM Unapplied Cash

(a/o 5/31/03)

Dealer Comp Vendor Credit Trade A/R

OMD

$18.1MM

eIKON

$5.7MM

OMD

$14.5MM

eIKON

$26.7MM

OMD

$1.3MM

eIKON$7.2MM8/12/03

• Little/No Reason Code Data at MSSC

Top 3 Defects ($$ & Counts)

• Need Service Invoice

• Missing Serial Number

• Need Equip Invoice

Top 3 Defects $$• Need Equip

Invoice• Further

Research: Equip

• Billing Error: Equip Invoice

Top 3 Defects (counts)

• Converted items

• Unclaimed property

• 3rd Party

Top 3 Defects (counts)

• Underpaid• Overpaid due

to adjustment• Payment sent

to wrong address

1 2 3 4 5 6

Top 3 Defects ($$ & Counts)

• No Bill• Not Linked• No Equipment

IKON MSSC Unapplied Cash Flow Down

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Project Definition

Problem Statement:

Discrepancies in systems of record (Canon, Ricoh) result in payments received from vendors that do not match the invoices in Oracle resulting in unapplied cash. This causes an increase in DSO, decrease in customer satisfaction and considerable research and rework by multiple functions within IKON.

Project Definition:

Reduce number of “no service invoices” by 70% which will result in a decrease of unapplied credits received from Canon and Ricoh and the elimination of 8 cash application positions. Six Sigma Project (0307-44-002) to be completed by 12/31/03

Project Benefits:

Decrease labor required to research and correct unapplied cash

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Project Team

Champion – Donna Wood Financial Analyst – Frank Eaton Black Belt – Jonathan Williams Team Members:

IT Support – Anne Quigley Cash Applications – Lynn Hester Customer Care Center – Sue Knight Service – Cedric Trice, Josh Alexander

Master Black Belt – Laura Wells

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8/20/2003JonathanWilliams

Project #0307-44-002

Unapplied Cash – Canon & Ricoh Credits,Discrepancy in System

CT Tree

CT Satisfaction

Y1= Decrease Headcount in MSSC CashApllication function associated withunapplied Canon and Ricoh service

credits.

CT Cost

Cost of research,analysis andcorrection at theMSSC, CCC's andin the field.

CT Delivery

Customerdissatisfaction

Excessive reworkand cost

CT Quality

First time matchof credit toreceivable

Accurate/Timelymeter reads

AccurateContract set-up

Serial numberdata accuracy oninvoices

CT Tree

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SIPOC

8/24/2003JonathanWilliams

Project #0307-44-002

Unapplied Cash – Canon & Ricoh Credits,Discrepancy in System

High Level SIPOC

ServiceTechs

Contract Set-up org

Vendorsupplied

3rd partycustomers

Meter ReadCollectionTeam (CCC)

Accurate/timelymeter reads

Accuratecontract Setup

Serial #dataprovidedwith invoice

CashApplicationProcess(rework,research,correction)

CCC process(rework,research,correction)

Receivablescorrectlymatched toinvoices thefirst time

Errored/unappliedinvoicesprovided t othe CCC forresearch andcorrection

CFOorganization

Accuratefinancialstatements

CustomerSatisfaction

ReducedCosts

Requirements Requirements

Outputs CustomerSupplier Inputs ProcessInputBoundary

OutputBoundary

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Cash Application Unapplied-Atlanta CCC

5235 1665 1451 1450 1026 38746.7 14.8 12.9 12.9 9.1 3.5

46.7 61.5 74.5 87.4 96.5 100.0

0

5000

10000

0

20

40

60

80

100

Defect

CountPercentCum %

Per

cent

Cou

ntPareto Chart for Reason Codes

Invoice that has no base or meter

Missing Serial # in PO Field

Service invoice w/multiple erro

rs

Lack of Equip. In

voice

Service invoice pending research

by the MSSC

April 03

May 03

June 03

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Cash Application-credit matching process flow

8/21/2003JonathanWilliams

Project #0307-44-002

Unapplied Cash – Canon & Ricoh Credits,Discrepancy in System

OrderManagement

ContractManagement Meter entry

Cash ApplicationCanon/Ricoh

Interface

Macon Shared Service Center (MSSC)Atlanta Customer Care Center (CCC)

Current unapplied Statistics :

Total unapplied $7,167,075Southeast CCC $4,645,914Houston CCC $1,875,228In Process $645,932

Vendor CreditAssociate appliesreason code and

provides to CCC forresolution

Entry ofequipmentinformation

50 Stepsrequired to

download data(2 hrs/week/

vendor

Average 16,195transactions per

month

Entry of Contractbase/CPC datainto contracts

module

Web

Fax

Phone

ServiceTechnician

Vendor

Cusotomer

*Initial Samplerevealed 95%

inaccurate meter readentry

Field Service

ADS

ServiceTechnician

Oracle Module

14.8% of errors* = Missing serial #, 12.9% of errors=Lack of equip. inv., 12.9%of errors=Lack of service inv.

Hardcopy documentcreated

CanonData

RicohData

RemitanceMatch

Receivable?End

YES

REWORK, REWORK, REWORK!!

46.7% of errors40.6% of errors

NO

Vendor CreditAssociatematch?

YES

EstimatedDPMO=940,000

Vendor supplieddata

Unapplied Cash - Canon &Ricoh Credits

($12.96M over past 12 monthsrecieved

$7.1 currently unapplied)

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HeadcountCurrently

•20 (actual) 22 (budgeted) personnel scheduled to support entire company•Currently supporting two of five regions•Performing 60% of current unapplied dollars, 0% of backlog

At current levels, Cash Application team would have to add 13 people to stay current for two regions, with no decrease to the backlog ($ ).

Future•At current performance levels, team would have to add 63 additional headcount (over $2M in expense) with no decrease to the current backlog. Backlog will continue to grow.

This is not the answer!Focus areas :Meter Reads not accurate or timely (47% of errors), Lack of service & equipment invoices(26%) Missing serial # (15% of errors)

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Benefits of focusing on the supplier

•Current error rate on first time matching is 94%. Effective error rate is 100% because even first time matches must be reviewed

•Cash application associates currently resolve 1 transaction every 17 minutes

•Cash application receives averages 16,195 new credit transactions each month

•For every sustained incremental improvement of 720 (.04% of the total) matched transactions, Cash Application organization can reduce one associate.

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Next Steps

•Enhance measurement system – include metrics that reflect:

o First time match, remittance to receivable percentage

o Aged unapplied by reason code and functional responsibility

o Resolution productivity (time to complete MSSC, CCC’s)

oTransactions resolved by MSSC Cash Application

•Perform Measurement Systems Assessment on unapplied reason codes

•Expand cash applications sample to enhance accuracy of DPMO

•Determine if scope of this project should be expanded to include meter read accuracy.