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Accounts Payable Process:   An Office Kaizen Event   I. Overview Because of inefficient and

Accounts Payable Process:

 

An Office Kaizen Event

 

I.

Overview

Because of inefficient and non-existent accounts payable processes, many issues were arising and the department was at a critical point. Late fees were being applied to late payments from suppliers and vendors; the accounts payable department was working overtime with additional help to reduce the late fee charges being applied; the system of communication was causing excess wait time for receiving critical information to continue moving the process forward.

 
 

II.

Current State

! Late fees from paying vendors late

 

! Accounts payable department had excessive overtime

! Authorization process was long and unnecessarily complicated

! Long lead times for receiving critical information

! Increased wait times due to communication breakdown

! Communication process for tracking back any issues required much paperwork and verbal communication

! Filing, organization, and paper pile-up

! Paperwork was late and disorganized

! Difficult to keep track of who has what/turn around

! SOXA approvals/copies were in disarray or missing

! Papers were handled multiple times

! Batching/processing time was excessive

! Waiting for mail

 

! Retrieving receiver packets

! Time Cut-offs East vs. West

III.

Action Plan

Leadership staff, including the AP manager, held a meeting to discuss options to improve the accounts payable process with the following objectives:

 
 

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Reduce department overtime

 
 

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! Identify problem areas within system causing communication breakdowns

! Improve throughput to eliminate late fees

! Create a visual workplace to increase cross-training abilities

Staff decided to conduct a Kaizen event to show immediate and significant

improvements to solve issues.

accounts payable department as well as people outside of the department.

The Kaizen team consisted of both people from the

IV. Kaizen Event

Step 1 - Created a process map to determine the number of steps and the largest

gaps (lead times / wait times) within the system. added” vs “Non Value added” processing time.

The team calculated total “Value

Process Map of Accounts Payable Processes:

total “Value Process Map of Accounts Payable Processes: ! Value Added Time = 324 minutes !

! Value Added Time = 324 minutes

! Non Value Added Time = 35, 200 minutes or 80 days.

The steps were separated into non-value added, value added, and needed (but not value-added). Out of the 119 steps, only 9 were value-added.

Step 2 – Created a matrix to separate the non-value added steps into categories and determine most critical areas to focus on during the event.

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  Step 3 - Figured out ways to make needed steps shorter by focusing on
 
 

Step 3 - Figured out ways to make needed steps shorter by focusing on the following objectives:

Communication, standardization, tracking, work presentation organization and lead

times.

The chart below represents the findings of the current state based on the

process map created in step one.

 
 

Communication:

The team addressed communication issues by applying 5S principles to create a

 

more standardized process.

They improved and developed process steps which

identified who, what, where, when and how, greatly reducing overall miscommunication issues and eliminating the need for additional research, rework, and waiting for responses.

 

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Work Presentation and Standardization:

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One key observation was achieved by mapping how information was sent and

received internally.

the non-value added steps of the process.

approval information back to accounts payable.

The team identified four key internal groups contributing to

Each group was responsible for feeding

In most instances, the information was sent to the groups in an ad hoc format in a

batch system, adding to the cycle time.

to the groups was an issue and increased the lead-time for receiving approvals and paperwork back.

The large amount of paperwork forwarded

The team created a daily system, decreasing the batch sizes by 90% or more.

team took this process another step and added a color-coded system with time constraints. This gave those responsible the ability to track the compliance of each internal group’s response time.

The

the compliance of each internal group’s response time. The Folder system created to regulate batch sizes

Folder system created to regulate batch sizes and increase throughput and reduce lead times / wait times

Tracking:

The above picture shows each day with a different color folder with process owner

Each internal group had a mailbox within

and identified along with a time stamp.

their area in which the folders were placed daily.

to ensure that the incorrect day’s folder was not left in the box.

The colors were a quick identifier

In order to sustain the process, the team created a simple compliance sheet with

each department listed with Yes and No check boxes.

the Area Controller daily and the information keyed into a simple excel database

The form was submitted to

immediate.

At the end of the week, a compliance chart was printed and reviewed

 

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during the weekly staff meetings.

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Over the next 30 days the compliance reached

100% for all internal groups, creating a total reduction of tracking days by 92.3%.

Training:

The team created and held training to present the new system to the four internal departments. The training was designed to help them understand why the new system was important and what was causing the lead times. They were also shown how to use the forms, which helped to raise the overall compliance scores as well.

V. Final Results of Kaizen Event

how to use the forms, which helped to raise the overall compliance scores as well. V.

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! ! ! Before and After Pictures ! 6 !
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Before and After Pictures
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! ! ! VI. Conclus ion The Kaizen event allowed the team to identify and improve

VI. Conclusion

The Kaizen event allowed the team to identify and improve a process that

negatively impacted four key internal departments, increased overall company costs, upset customers, and caused poor morale in the accounts payable

department.

identify root causes and apply easily executable solutions.

more than improve the bottom line: it also helped to kick off lean efforts within all aspects of the business.

By focusing on the process and the individual, the team was able to

Overall the event did

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