Operations Management Lesson 8 Exercise
Here I would like to get back to IBM Global Financing (IGF) process map that I described in Lesson 3 exercise.
Let's assess each step if it adds value from the Lean thinking perspective:
- Step 1 "PREPARATION OF CUSTOMER REQUEST". Perfect performance of this step can help to avoid many issues in next process steps and properly prepared set of information allows to pass all approval stages faster and easier.
- Step 2 "CREDIT CHECK". From my point of view this step adds value as it helps to dcrease the risk of unpaid debts and as a result decrease the cost of financing. This leads to the lower level of "waste" and cheaper financing interest rate for our customers. This step is one of the bottle necks of the process as capacity of credit department usually lower than the existing demand. So in peak time this can create a real issue for the business.
- Step 3 "PRICING PREPARATION". This step also adds value as we can combine all incoming data for the pricing in a way to minimise customer's costs and cover all our risk and interest. From the other perspective it is another bottle neck as the capacity also does not match the business needs, but as this bottle neck is wider than "CREDIT CHECK" usually there is no big queue for pricing.
- Step 4 "CONTRACTS NEGOTIATION". If customer accepts the offer we move to the step of contracts negotiation. This step is the narrowest bottle neck in the process as the capacity of the legal department is really unsufficient. But this step for sure adds value as it helps to avoid most of risks in the future and ensure the smoth contract fullfilment during the financing term.
- Step 5 "BILLING". This is easy mechanical step that does not create lots of issues.
Once again reviewing the process of IGF business flow I can determine that this is rather push mode of work flow than pull one. This means that all existing bottle necks create a number of queues that does not allow the business to flow smoothely. Main reason is the nature of business. As IGF is a captive financing company it highly depends on the demand for the main IBM products (HW, SW, Services) and due to the high fluctuation of the attachement rate the demand for IGF financing is hardly predictable. So IGF mainly use MRP system of inventory management. That means that we have and inventory of available pool of money that we have to put into the market and renew this pool when we reach some critical point.