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A large MNC was faced with the problem of rise in the dollar
value of write offs that were disputed. This was having an
adverse impact on the financials of the company. It was found
that disputed write of cases were 0.17% of the revenues
amounting to US $4.06 million.
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Problem Exploration and Segmentation |
The Black Belt assigned to the project did an in depth study
of the process and segmented data in greater detail. It was
found that 93% of the disputed write offs were controllable.
Further segmentation revealed that out of these 93% cases, 37%
were attributable to upstream process of Order Management and
56% were attributable to the downstream process of
Collections.
Using Six Sigma tools and techniques a number of root causes
were identified both in the upstream process of Order
Management and in the downstream process of Collections. Some
of the key reasons for disputed write offs that were
established in the Order Management process were related with
Purchase order related issues, Invoice related issues, proof
of delivery not available and tax & shipping related issues.
Similarly the main reasons in the collections process for
disputed write offs were identified as No Investigation or
calling record being maintained, inadequate information
availability, short payment by customer and Incorrect receipt
application.
Solutions were brainstormed and implemented for the root
causes that were identified by the team during the root cause
analysis. The key solutions in the upstream process of order
management that were implemented were: Inclusion of Proof of
delivery as a key performance metric in the order management
process, accuracy targets were put on the Invoices and
purchase orders, SLAs were defined on accuracy & timeliness of
Invoices. Besides, this the reporting & review mechanism was
also strengthened. On the downstream collections process a
number of steps were added to strengthen reporting. High
dollar and low dollar targets for 1-30, 31-60, 61-90 and 90+
brackets were fixed. Escalation mechanisms were built: like
compulsory review by Management of all ARs in 90+ day bucket
and making action plans for their recoveries. To tackle
problem of short payment a monthly review of all account
statements was started to ensure early identification of
invoice related issues.
The project on completion yielded total financial benefit of
US $ 2 million.
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