Reference no: EM133038424
Procure-to-pay process at BuildIT.
BuildIT is a construction company specialized in public works (roads, bridges, pipelines, tunnels, railroads, etc.). Within BuildIT, it often happens that engineers working at a construction site (called site engineers) need a piece of equipment, such as a truck, an excavator, a bulldozer, a water pump, etc. BuildIT owns very little equipment and instead it rents most of its equipment from specialized suppliers.
The existing business process for renting equipment goes as follows. When site engineers need to rent a piece of equipment, they fill in a form called "Equipment Rental Request" and send this request by e-mail to one of the clerks at the company's depot. The clerk at the depot receives the request and, after consulting the catalogs of the equipment suppliers, selects the most cost-effective equipment that complies with the request. Next, the clerk checks the availability of the selected equipment with the supplier via phone or e-mail. Sometimes the selected option is not available and the clerk has to select an alternative piece of equipment and check its availability with the corresponding supplier.
Once the clerk has found a suitable piece of equipment available for rental, the clerk adds the details of the selected equipment to the rental request. Every rental request has to be approved by a works engineer, who also works at the depot. In some cases, the works engineer rejects the equipment rental request. Some rejections lead to the cancellation of the request (no equipment is rented at all). Other rejections are resolved by replacing the selected equipment with another equipment-such as a cheaper piece of equipment or a more appropriate piece of equipment for the job. In the latter case, the clerk needs to perform another availability enquiry.
When a works engineer approves a rental request, the clerk sends a confirmation to the supplier. This confirmation includes a Purchase Order (PO) for renting the equipment. The PO is produced by BuildIT's financial information system using information entered by the clerk. The clerk also records the engagement of the equipment in a spreadsheet that is maintained for the purpose of tracking all equipment rentals.
In the meantime, the site engineer may decide that the equipment is no longer needed. In this case, the engineer asks the clerk to cancel the request for renting the equipment. In due time, the supplier delivers the rented equipment to the construction site. The site engineer then inspects the equipment. If everything is in order, the engineer accepts the engagement and the equipment is put into use. In some cases, the equipment is sent back because it does not comply with the requirements of the site engineer. In this case, the site engineer has to start the rental process all over again.
When the rental period expires, the supplier comes to pick up the equipment. Sometimes, the site engineer asks for an extension of the rental period by contacting the supplier via e-mail or phone 1-2 days before pick-up. The supplier may accept or reject this request.
A few days after the equipment is picked up, the equipment's supplier sends an invoice to the clerk by e-mail. At this point, the clerk asks the site engineer to confirm that the equipment was indeed rented for the period indicated in the invoice. The clerk also checks if the rental prices indicated in the invoice are in accordance with those in the PO. After these checks, the clerk forwards the invoice to the financial department and the finance department eventually pays the invoice.
Issues with the process:
During an audit of this process, several issues were identified. It turns out that oftentimes the site engineer finds that the equipment delivered at the construction site is not suitable because it is either too small or not powerful enough for the job. Hence it has to be rejected. One clerk claims that the site engineers generally do not specify their requirements in sufficient detail. Other clerks blame the suppliers for giving inaccurate or incomplete descriptions of their equipment in their catalogues. On the other hand, site engineers complain that they are not consulted when there are doubts regarding the choice of equipment.
Another issue is that BuildIT spends more in equipment rental than what it budgeted for. An auditor pointed out that one of the reasons for excessive expenditure was that site engineers were keeping the rented equipment longer than initially planned by using deadline extensions. Site engineers knew that it was easy to get a deadline extension. They also knew that it took quite some time to get equipment rental requests approved, and the larger the cost and the duration of the rental, the slower it was to get it approved. So in many cases, site engineers were renting equipment several days before the date when they actually needed it. When the deadline for returning an equipment approached, they just called the supplier to keep the equipment for a longer period.
One more issue spotted by the auditor is that a significant amount of late-payment penalty fees were paid to the suppliers because invoices for equipment rental were not paid by their due date. The clerks blamed the site engineers for being slow in approving the invoices.
In summary, we can distinguish at least three issues. First, the wrong equipment is being delivered on some occasions. Secondly site engineers are frequently asking for deadline extensions. Thirdly, BuildIT is often paying late payment fees to suppliers.
Questions:
Apply the redesign heuristics in order to address the three issues documented above by naming the related heuristic(s) and illustrating how to apply the heuristic(s) to resolve each of the issues and justify why it(they) will work. (8 marks)
Explain the impact of each of the proposed heuristics in terms of the performance dimensions of the Devil's Quadrangle in the context of the case study.