Question

The case study covers a period of about 18 months, following a plumbing product distributor. The company wasn’t being well-received by its customers, and it endeavored to find out why. The company asked the customers for what mattered most for them and the investigation showed that customers expected prompt delivery, correct product selection, and a knowledgeable distribution team. The company then wanted to describe their problem – but not with words. They wanted to use data. So, they did a little data collection, and what did they find? Their order fulfillment cycle (OFCT) was out of whack with the rest of the industry. It took them 46% longer to deliver products than their competitors. That’s why customers were upset. After this discovery, they committed to lowering their OFCT – the time from the order entry to the final delivery of a product – in hopes that it would improve their reputation with customers. The company then worked to answer one question – why was their delivery so slow, compared to their competitors? They brainstormed causes, and came up with four potential causes: (1) the accuracy of the sales plans, (2) safety stock issues, (3) vendor delivery performance, and (4) falling behind the manufacturing schedule. They conducted regression analysis on all potential causes, to see which one would cause the most trouble. And they found it. After creating a Pareto diagram, they realized that 74% of their sales came from only 21% of their products – and there wasn’t enough safety stock to get those in-demand products to all the customers who wanted them. They started by implementing a monthly demand review, to make sure the in-demand products stayed in-demand, and it wasn’t a one-time fluke. The second measure was to actually order and provide the customers with the products they wanted. Finally, as they wanted to make sure their solutions worked for as long as possible, so they created plans to monitor sales on their bestselling 21% of products (to make sure they weren’t exceeding or under-supplying demand). And every year, they’d review how well those products sold; if a product started following out of high demand, they could replace it with a product that was coming into high demand.

a) What methodology did the company use to address the concerns of their customers?

b) Describe the steps performed by the company?

c) what results should the company expect from this project?

Answer 1

Answer1: The company used the “Statistical technique - Pareto analysis and diagram” to address the concerns of their customers by using the data collection and analysis which helped them to formulate the problem. They found their order fulfillment cycle (OFCT) was out of whack with the rest of the industry. It took them 46% longer to deliver products than their competitors.

Answer2: Some of the steps performed by the company are –

- Data collection to formulate the problem

- Brainstorming session to determine the probable causes of the problem

- Categorization of the causes (such as accuracy of the sales plan, safety stock issues, vendor delivery performance and falling behind the manufacturing schedule)

- Data analysis through regression analysis on all potential causes (to check which one would causes the most problem)

- Creation of Pareto diagram (by applying 80/20 rule)

- Monthly demand review on the basis of the Pareto analysis outcomes

Answer3: The company expects outcomes from this project as to make sure the in-demand products stayed in-demand, to actually order and provide the customers with the products they wanted, to make their solutions worked for as long as possible to have plans in place to monitor sale. So they should make sure that they are not exceeding or undersupplying demand. In cases a product started following out of high demand then it will be replaced with a product which would appear into high demand.