Receiving Department, Customer Payment Process
- In order to reduce delinquent dollars in the customer payment process, we needed to reduce Days Sales Outstanding (DSO) from:
- 34 days to 30 days
- Entitlement of 25 days
- 37 days to 33 days
- Entitlement of 28 days
- The charter of this project was written on July 13 and completed on December 12 of the same year.
Key Tools Used:
- Black Belt tools that SBTI teaches were used
- These included the use of:
- Process Mapping
- Cause and Effects matrix
- Multi-Vari Analysis
- Failure Modes Effects Analysis and Process FMEA
- Capability study
- A new process was to be determined, and personnel trained in it.
- All Business Managers were briefed and trained on the payment processes and performance of their specific customers
Metrics or Results:
- Approximate savings of $7,000,000 were realized.
- The number of days sales outstanding were reduced by approximately a week (38 to 31 days for domestic sales).
- Acceptable variation on these values was cute from 21 to 7 days for domestic sales.
- Control new and smaller accounts from the beginning.
- For problematic customers, investigate financial penalties for chronic delinquency.
- Look for efficiencies (electronic, etc.) and cost savings that can be leveraged into new term negotiations.