Reference no: EM131919142

Problem: Purchasing at Midwestern State University

Jane Polski, the newly hired director of university purchasing, took one final look at the report from her purchasing manager, removed her glasses, and rubbed the bridge of her nose. Surely, she thought, things could not be that bad. According to the report, which she had commissioned, the centralized ordering process at Midwestern State University was simply "out of control." Various academic departments that placed orders with through the purchasing system had complained that orders were often lost. Furthermore, the amount of time that it took for an order to be placed was difficult to predict. For example, the chemistry department had placed an order for two identical mass spectrometers, separated by three weeks. The first one took two weeks to arrive; seven months later the second order was still unfilled. Orders were often incorrectly entered. When this occurred, if the ordering department did not want to accept the incorrect order and if the item could not be returned (something that often happened because the items ordered were unique), the purchasing department was obligated to assume responsibility for the ordering error. A separate budget category had been set up for this problem (last year, it accounted for over 10 percent of total costs).

Once a year, the purchasing department sold off all the mis-ordered items-often at a significant loss. Finally, university personnel complained that, when they called the purchasing department to identify the status of an order, no one seemed to know how to locate it. This was bad, and Jane knew that she had to do something- that was one reason that she was hired-to significantly improve operations within the purchasing department. Midwestern University had grown tremendously in the number of programs it offered. It had been decided some 40 years ago to centralize purchasing activities in one department (previously, each unit managed its own purchases). The reason for this decision was to reduce costs and improve operating and acquisition efficiencies. The current department was staffed by some 40 buyers, planners, and clerks. Most of these people had little or no prior professional purchasing experience. Furthermore, many had little more than a high school education. Most of them saw their jobs as consisting mainly of simply placing orders. With the growth in technology and the rapid changes taking place in academic research, placing orders efficiently was becoming more difficult. Systems that had worked before were not working well now. Jane had commissioned a series of purchasing team meetings aimed at identifying areas of possible improvement. As she reviewed the report, she noted the following issues uncovered by the team:

• The department had more than 6,000 different forms. Many of the forms were developed by individual buyers for their own uses.

• The forms were difficult to complete since critical terms were often underfined and were thus interpreted in different ways.

• The department lacked a standard approach to processing orders. Workers often felt that they had many "exceptional" items to purchase that required special processing. These exceptions were not well documented.

• Except for notification of when the orders were filled, there was little contact with the customers once the request for an order was submitted.

• Department performance was evaluated in terms of utilization and cost-what percentage of the staff time was devoted to receiving and processing orders.

• Every buyer processed orders differently. For example, one buyer tended to place all orders on the last day of the week, while another worked on each order to completion as soon as it arrived.

• Orders were typically worked on in the order received without any consideration of urgency or importance. There were other issues, but Jane knew that she had enough to start devising a plan for change. The question was, where to start?

Questions

Jane is considering the application of lean services to this department. To help her, she needs the following questions addressed:

1. What should the desired outcome (objective) for this department be? How does the purchasing department create value?

2. Purchasing personnel feel that since Midwestern State University is a public, rather than private, institution, they really do not deal with customers. What is your assessment of this view? Why?

3. What measures should be used to evaluate the performance of this department?

4. Evaluate the suitability of lean services to this department.

5. What lean tools and procedures would you suggest Jane introduce into this department? Why?