Summary

A major international logistics company was having problems with its quotation system.  The first was when a potential client requested a price. It would often take the company up to three week to produce the required quotation.  In this time their competitors had submitted an alternative quote; agreed a price and won the contract. 

The second problem was the accuracy of the quotation.  On a number of occasions the contracts, if won, were identified later as making a loss for the business.

This article outlines the steps that the Company took to solve their problems. 

Results

The results were striking; originally it took anywhere from three days to three weeks to produce an inaccurate quotation.  Using the PTS approach an accurate quote could be produced in 30 minutes and the Company’s confidence in each one was 100%. 

In addition to solving the original problem the Company also had the information and tools within the PTS computer system to undertake further initiatives to improvement to productivity, which will be covered in a future article including, Process Improvement, Lean Analysis, Resource Management and Process Alignment.

The Cause of the Problem

The problems were caused by:

1. Using previous contracts as a basis for the required quotation.Finding a comparable contract took time since no two contracts were identical.There was also the problem of ‘compounding an error’ since many previous quotations suffered from the ‘loss making’ scenario once they had been accepted.
2. The need to obtain estimated times for any work not previously undertaken.Again, this took time, but more importantly the estimates used were very subjective and depended on a number of factors such as:
   1. Which Operative/Supervisor/Manager was asked for the estimate?
   2. Which country and/or location was used as a basis for the estimate.
   3. How accurately the ‘estimator’ understood the requirements of the quotation.

Deciding how to Solve the Problem

Firstly, it was necessary to determine just exactly what was required. The result of this determination was; an objective, consistent, flexible and rapid means of producing quotations.

This would require the development of a ‘model’ in which the work/time necessary to complete a contract profitably could be accurately and realistically calculated.  Stage one of producing this ‘model’ was to obtain a ‘standard time’ for each Task/Activity in the logistics chain.  This was achieved using a Pre-determined Time Systems (PTS) in this case M4’s Warehouse Data. The benefits of using M4’s Warehouse Data are:

• The rapid creation of ‘standard times’ which are easily updated if change occurs,
• Powerful ‘what-if’ analysis that can be done to model changes in work volumes, staff etc using the M4 Management System’s measurement module.
• Performance improvement
• Evaluating the effect of change before implementation.

They also provide data in a format which can be used to create ‘user specific’ models.  These are then used to generate the ‘should-take times’ for all variations of the tasks in that workplace. 

Obtaining the Solution

The generation of ‘standard times’ was achieved by:

1. Interviewing staff to obtain details of how each job was done.
   In most companies what the staff do is often different to what the procedure manual says should be done.  This is often for a number of reasons, including:
   • Procedure manuals being out of date
   • Staff have found better ways of doing the job
   • Corners being cut which should not be
   • Variations in layout, materials quality that require amendment to procedures from time to time.
2. Inputting process descriptions to the M4 measurement module.
   This was used to produce a flow process chart that was shown to the staff to ensure it was an accurate recording of what happens.  Any discrepancies were rectified and the charts agreed.
3. Encoding the charted actions/processes with the M4 Warehouse Data.
   The average occurrence of the actions within the job were obtained and entered into the computerised PT System. This gave an average time to complete each job.
4. Showing the times to the staff and getting their agreement.
   When staff were unsure about the fairness of a particular time, a ‘batch’ demonstration (where they could complete a small batch of the work themselves) was carried out to give them an opportunity to check its validity.
5. Analysing the times to identify consistent tasks within processes.
   The measurement was analysed to identify tasks which appeared consistently across all jobs which could be used as building blocks to calculate the standard time for any specific quotation.

The times obtained through this process provided the ‘average’ time to complete a ‘typical’ quotation.  However, the time to complete a specific quotation would always differ and this is what was required to enable accurate quotations to be produced when a client requested one. The structure of the ‘time build-up’ in the M4 system provided the answer. 

Within each individual quotation the quantity or volume for each activity or action could be entered individually into a ‘volumes register’.  This would then give specific times for each part of the quotation.  Using this approach the computer system then calculated the standard costing of the work involved in the contract including the desired profit margin.

The Outcome

The results were striking; originally it took anywhere from three days to three weeks to produce an inaccurate quotation.  Using the PTS approach an accurate quote could be produced in 30 minutes and the Company’s confidence in each one was 100%. 

In addition to solving the original problem the Company also had the information and tools within the PTS computer system to undertake further initiatives to improvement to productivity, which will be covered in a future article including, Process Improvement, Lean Analysis, Resource Management and Process Alignment.