PROJECT DESCRIPTION:

11

Six Sigma Project TitleSix Sigma Project Title

Reduce incidence of returned Reduce incidence of returned Request for Purchase (RPRequest for Purchase (RP))

Project No.: OAS-07-009Project No.: OAS-07-009 (23 September 2007)(23 September 2007)

22

Division Champion: Division Champion: Cécile LHF GregoryCécile LHF GregoryChampion: Champion: Paulino P. Santiago, Jr.Paulino P. Santiago, Jr.Team Leader:Team Leader: Noli D. Macariola Noli D. Macariola

MembersMembers::Nemrod Manalo, Kit Palabrica, Edwin Montevirgen, Mila Aquino, Nemrod Manalo, Kit Palabrica, Edwin Montevirgen, Mila Aquino,

Oscar Roman, Jonathan Guevara, Fred Basa, Grace Sioting and Oscar Roman, Jonathan Guevara, Fred Basa, Grace Sioting and Victor LoVictor Lo

33

PROJECT DESCRIPTION:OAIS-PC receives about 1,500 RPs for goods and services. About 22.34% of these RPs or 335 RPs are defective (insufficient budget and outdated or obsolete specifications) and are returned to the user units. Returning RPs to user units causes procurement process to stop that results to customer dissatisfaction. To ensure that only defect free RPs are initiated by user units that would eliminate or decrease incidence of returning RPs.PROBLEM STATEMENT:RPs prepared and initiated by user units with insufficient budget and outdated or obsolete specifications are returned which delay the start of the procurement process or stop the procurement process by OAIS-PC. This in turn results to customer dissatisfaction, lost of opportunity on the user of services or goods, or delay in project implementation.

Project Title: Reduce incidence of returned Request for Purchase (RP)

DEFINE

44

DEFINE

GOAL STATEMENT:

How to work with the OAIS-PC’s clients (user units) for them to provide defect-free RP, thus reducing the number of incidence of returned RPs, improving total processing time for processing RPs to PO, and increasing customer satisfaction. The goal is to reduce the incidence of returned RPs by 50%.

Project Title: Reduce incidence of returned Request for Purchase (RP)

55

High Level Process MapDEFINE

User identifies procurement

needs Initiate RP Approve RP

OAIS-PC receives RP

Start Procurement process Initiate PO Approve PO END

START

66

Detailed Process Map for RPDEFINE

RP Initiation & Approval

OAI

S-PC

Use

r Uni

t

StartUser Unit Identifies

Procurement Needs

Preparer prepares (modifies) RP on-

line via Oracle including budget,

specs., etc.

Verifier verifies RPApprover approves

RP

More than USD25K

Head of User Unit approves RP

Director approves RP

More than USD50K

PD, User Unit, approves RP

OAIS-PC receives RP

End

NO

YES

NO

YES

Buyer reviews and checks

correctness and completeness of

RP

Defective RP – Specs. & Others

Process RP and start procurement

process

Defective RP – Insufficient Budget

Return RP to User Unit

(Insufficient budget or others)

Buyer Initiates PO

YES

NO

YES

NO

A & B

Goes thru the hierarchy of the Business Unit

Cost Center owned by other Business

Unit?

YES

NO

77

Detailed Process Map by OAFA-APDEFINE

A

Process Map (As-is) Budget Preparation for Expendable Supplies

Oth

er D

ept

OA

FA-A

PO

IST

PR

INTI

NG

OA

OD

Send memo to various dept/offices for budget requirements

Budget coordinators received copy of memo

from OAFA-AP

Prepare budget requirement for succedding year

Submit to Head,OAFA-AP

Compute AMU’s requirements for computer & non-computer

related supplies, computation as ff:

Mo. Ave Usage=12 x 1.07UC=last acq cost + 5%

Reproduction supplies computed as ff:

Mo. Ave x 12 (buffer & UC to be determined by Printing,

Incidental cost to be computed by AMU)

Send memo and list of stock items with historical data &

recommended budget requirement to OIST &

Printing.

Require OIST to submit list of printers, including model no., acquisition date, etc.

Receive budget

proposals from OIST &

Printing, including list of printers from OIST.

Receive memo from

OAOD.

Review budget proposals of MMU,

OIST & Printing. Effect the necessary

adjustment, (unit cost, quantity,

specs, desc.) Send copy of memo to Dept/Sections’

Budget Coordinators

Receive and review budget proposals from various dept/

office. Review requirement of dept/offices which often fail to use their budget allocation or late submission of

RP and subsequently adjust

them

Consolidate, classify stock & non-stock budget proposals. Create lump sum allocation for budget requirements of

other dept/offices. Coordinate closely with OAOD on foreign rates.

Consolidate dollar-based proposals and apply 10%

allowance for freight charges.

Submit to Supervisors

for review and endorsement

to Head, OAFA-AP

End

Start

Review historical data provided by MMU. Advise Sections to

prepare budget request for non-std items

Effect necessary adjustment on

MMU’s proposals

Review and consolidate budget requirements for non-std supplies with the ff: computation:

Qty=RITS +10% allowanceUC-latest acquisition+10% or Internet

Prepare list of printers, including model no. acquisition date. etc.

Submit to IT (OIST)Specialist for

approval

Submit to Head, OAFA-

AP

Review historical data of stock items provided by MMU.

Effect necessary adjustment on

MMU’s proposals

Compute cost based on PO price and 1% allowance

Submit to Head, OAIS-LM for approval

Submit to Head,OAFA-AP

88

Detailed Process Map by OAFA-FMDEFINE

B

OAFA-FM Internal Pre-RP Preparation Process Flow for Goods

Se

rvic

e P

rovid

er

Se

rvic

e P

rovid

er

Asst.

En

gin

ee

r /

SE

OA

sst.

En

gin

ee

r /

SE

O

STARTReport Parts for

Replacement

Authenticate Report

Item Available on Stock

Determine Qty. Required

Determine Tech. Specs.- On Line Item Code

- Specs from Catalogue- Specs on the Part Itself

- Specs from Internet

Estimate Price- On Line Item Code

- Internet Price- Phone Inquiry

- Catalogues / Brochures- New / Old Quotes

- Based from experience

Prepare On-Line Stock Withdrawal

FormEND

Determine Date Needed

Petty Cash Purchase

Material a Stock Item

Fill-up Internal RP Request Form

Determine Budget Charging / Sufficiency

END

Request Item Code

NO

YES

NO

NO

YES

YES

99

Detailed Process Map for RP -OIST

DEFINE


OAI

S-PC

OIS

T


Procurement Needs



specs., etc.

Verifier verifies RPApprover approves

RP

More than USD50K

Head, CSU approves RP


More than USD100K

PD, OIST approves RP

OAIS-PC receives RP

End

NO

YES

NO

YES



RP

Defective RP – Specs. & others


process

Defective RP - Insufficient Budget



Buyer Initiates PO

YES

NO

YES

NO

C


Unit?


YES

NO

1010

Detailed Process Map for RP -OISTDEFINE

C

OIST Internal Pre-RP Preparation Process Flow

OIS

T –

Ce

ntr

al

Se

rvic

es U

nit

OIS

T –

Ce

ntr

al

Se

rvic

es U

nit

OIS

T’s

En

d-U

se

rO

IST

’s E

nd

-Use

r

START

User Unit Completes RP form- project related- re-order items

- new/additional licenses- hardware upgrade

- software needs- Contract reference

Determines Specs.- internet

- catalogues- market

intelligence

Determines Budget- previous order

- internet- market intelligence

Approve by User unit PS?

END

Submit approved RP to CSU

CSU Staff checks completeness of RP Request form

Complete RPCSU Staff

encodes request in Oracle

END

NO

YES

NO

YES

1111

Output characteristics/ Project Y Relationship

Matrix DEFINE

Output Characteristics corr

ect

just

ifica

tion f

or

sole

sourc

e a

nd

bra

nded ite

ms

corr

ect

speci

fica

tions

suffi

cient

budget

suffi

cient

need d

ate

pro

vid

ed

8 8

8 - Strong relationship

- Moderate relationship

- Weak relationship

Potential Output Measures

Defect free approved RP

1212

Critical to QualityDEFINE

Output Unit RP

Output Characteristic

(Big Y)Defect free RP

Operations Definition

Process starts from indentification of procurement needs to RP initiation to RP approval and receipt of RP by OAIS-PC in oracle

How process will be measured

The approved RP is check and review by OAIS-PC whether it is a defect free or defective.

Specification Limits

none

TargetTo reduce by 50% the number of defective approved RP, thus reducing the incident of returning RP

Defect Defective approved RP

No. of Defect Opportunities

Per Unit1 opportunity for a defect per RP issued

CTQ

Project Y (Little y) Measure

1313

1. Correct specs.2. Sufficient budget3. Sufficient need date4. Correct justification

OAIS-PCApprovedRP

1. User units identifies procurement needs2. Initiate RP3. Approver approves RP4. OAIS-PC receivesRP in oracle5. OAIS-PC (buyer)checks and reviews correctness and completeness of RP6. Return defective RP7. OAIS-PC Processdefect free RP and start procurement process.

Initiation of

Request for

Purchase

(RP)

User Units

S I P O C CTQs DEFINE

CTQsCTQsSSupplier OOutputPProcessIInput CCustomer

1414

Time LineDEFINE

Time Line

ControlAnalyze ImproveMeasureDefine

Mar - Apr Apr – May June Jul - Aug Sep

1515

Data Collection MEASUREMEASURE

Data collected from Oct 06 to 20 Apr 07

Particulars Nos. of RPs%

against Total

% against

Returned

Approved 725 100.00% -

Returned 162 22.34% 100.00%

Due to Budget 107 14.76% 66.05%

Due to Others 55 7.59% 33.95%

1616

PARETO CHART MEASUREMEASURE

Count

Perc

ent

C2Count 107 55

Percent 66.0 34.0Cum % 66.0 100.0

OthersBudget constraint

180

160

140

120

100

80

60

40

20

0

100

80

60

40

20

0

Pareto Chart of Defects

1717


Count

Perc

ent

C1

Count 4 3 3 3 2 2 8Percent 20 20

3217 10 9 4 3 2 2 2 2 2

321 1 5

Cum % 20 40 57 67 75 79

28

82 85 87 89 91 93 94 95 100

16 14 6 5 4

Oth

er

OAGI

OAFA

-SE

SER

D

SARD

CW

RD

RSDD

ERD

BOD

OAFA

-AP

BPM

SD

OAIS

-LM

OAFA

-FM

OIS

T

DER

180

160

140

120

100

80

60

40

20

0

100

80

60

40

20

0

Pareto Chart of User Units/ Dept - Budget & Others

1818


Count

Perc

ent

C3

Count 3 2 2 2 1 1 1 5Percent 21

2319 19 8 7 4 4 3 3 2 220

2 1 1 1 5Cum % 21 40 59 67

20

74 78 81 84 87 89 91 93 93 94

9

95 100

7 4 4 3

Oth

er

OGC

OAIS

-GR

OAFA

-SE

OAGI

OAFA

-AP

CW

RD

SARD

RSDD

ERD

BOD

BPM

SD

OAIS

-LM

OAFA

-FM

DER

OIS

T120

100

80

60

40

20

0

100

80

60

40

20

0

Pareto Chart of User Units - Budget Constraint

1919


Count

Perc

ent

C5

Count 1 1 1 2Percent 21.8 16.4 14.5 12.7 12.7

127.3 3.6 1.8 1.8 1.8 1.8 3.6

Cum % 21.8 38.2

9

52.7 65.5 78.2 85.5 89.1 90.9 92.7 94.5 96.4 100.0

8 7 7 4 2 1

Oth

er

OAFA

-SE

OAFA

-CS

CW

RD

BOD

SER

D

OAFA

-AP

OAIS

-LM

BPM

SD

OAFA

-FM

OIS

T

DER

60

50

40

30

20

10

0

100

80

60

40

20

0

Pareto Chart of User Units - Others

2020

Sigma LevelMEASUREMEASURE

Process Sigma Computations:Process Sigma Computations:

Nos. of transactionsNos. of transactions 725725

Nos. of defectsNos. of defects 162162

Calculation ResultsCalculation Results

DPMODPMO 223,448 223,448

Defects (%)Defects (%) 22.34%22.34%

Yield (%)Yield (%) 77.66%77.66%

Process Sigma LevelProcess Sigma Level 2.262.26

2121

ANALYZEANALYZE

Cause-and-Effect DiagramCause-and-Effect Diagram

DefectFree RP

Others

Procedure

Equipment/ IT Policies

Personnel

- Roles and Responsibility

- Education/Training & Familiarity

- Support from Supervisors

- Unrealistic Prioritization

- Age

- Attitude/lack of interest/motivation

- Inconsistent Policy

- AO for Asset Management& Inventory Control

- Deactivation ofSupplier

- Oracle System

- Computer

- Guidelines in returning of RP

- Monitoring/Tracking

- Number of line items per RP

- Business Unit BrandPreferences

- Outdated / obsolete/ incorrect specs.

- Insufficient budgetestimates

- Foreign Exchange

Cause and Effect Diagram

2222

DefectFree RP

Others

Procedure

Equipment/ IT Policies

Personnel

- Roles and Responsibility

- Education/Training & Familiarity

- Support from Supervisors

- Unrealistic Prioritization

- Age

- Attitude/lack of interest/motivation

- Inconsistent Policy

- AO for Asset Management& Inventory Control

- Deactivation ofSupplier

- Oracle System

- Computer


- Monitoring/Tracking


- Business Unit BrandPreferences

- Outdated / obsolete/ incorrect specs.

- Insufficient budgetestimates

- Foreign Exchange


ANALYZEANALYZE

Cause-and-Effect DiagramCause-and-Effect Diagram

N

NN

N

N

NN

NN

N

N

N

C

N

C

C

C

N

2323

ANALYZEANALYZECause-and-Effect Diagram

(Control Items)

Cause-and-Effect Diagram(Control Items)

DefectFree RP

Others

Procedure Personnel

- Education/Training & Familiarityw/Oracle



- Outdated / obsolete / incorrect specs.

- Insufficient budget estimates


2424

ImproveProposed Solution

Proposed Solutions

1. Early OAIS-PC Involvement – Buyer to help and guide end user in RP initiation vis-a-vis procurement procedure, policy and methodology. Buyer to assist in market information as requested by end user.

2. OAIS-PC to develop a procedure in returning RP – Buyer to advise the end-user before returning the RP.

3. RP approval hierarchy should be aligned to the PO approval hierarchy.

4. Buyer to include end user’s suggested suppliers in the RFQ.

2525

ImproveProposed Solution

Proposed Solutions

5. RP initiators should:(a) add 10% to the last acquisition cost or to the internet price in the RP

and add another 10% (indent orders) for the shipping cost.(b) update the description/specifications of the items they are requesting.(c) limit the number of items per RP to 20 items.(d) seek assistance on pricing the items with OAIS-PC prior to initiating

RP.

6. RP initiators should be given training in RP initiation on a regular basis (semi annual) or whenever a new staff is assigned to be RP initiator. Training to be conducted by OAFA-AP and OAIS-PC

2626

IMPROVEIMPROVEPiloted Solution

To be Process Map


OAI

S-PC

Use

r Uni

t


Procurement Needs



specs., etc.

Verifier verifies RP.Checks sufficiency

of budget and correctness of

specs.

Approver approves RP

More than USD25K

Head of User Unit approves RP


More than USD50K

PD, User Unit, approves RP

OAIS-PC receives RP

End

NO

YES

NO

YES



RP

Defective RP – Specs. & Others


process

Defective RP – Insufficient Budget



Buyer Initiates PO

YES

NO

YES

NO

A & B



Unit?

YES

NO

End-user to request OAIS-PC for assistance /

Early Procurement Involvement

Buyer informs End-user of the

defective RP

2727

IMPROVEIMPROVE

Approval HierarchyApproval Hierarchy

Value Band

RP Approval Hierarchy PO Approval Hierarchy

OIST ALL Business Units

of OAS

OAIS-PC

US$25,000 and below Head, Central Services Head, Business Unit Head, OAIS-PC

US$25,001 to US$50,000 Head, Central Services Director, OAFA/OAIS Head, OAIS-PC

US$50,001 to US$100,000 PD, OIST PD, OAS Director, OAIS

Above US$100,000 PD, OIST PD, OAS PD, OAS

Value Band

RP Approval Hierarchy PO Approval Hierarchy

OIST ALL ROLL OUT UNITS of ADB

OAIS-PC

US$25,000 and below Head, Central Services Head, Business Unit Head, OAIS-PC

US$25,001 to US$50,000 Head, Central Services Head, Business Unit Head, OAIS-PC

US$50,001 to US$100,000 PD, OIST Director, OAFA/OAIS Director, OAIS

Above US$100,000 PD, OIST PD, OAS PD, OAS

As is Approval Hierarchy

Proposed Approval Hierarchy

2828

IMPROVEIMPROVEProposed Solution

Control Factor Critical Issues, (C) Proposed Solution Owner Status

A. PersonnelA. Personnel Education/Training & Education/Training & Familiarity with OracleFamiliarity with Oracle

- Conduct Training for end-users on a regular Conduct Training for end-users on a regular basis (semi-annual)basis (semi-annual)

- Early OAIS-PC InvolvementEarly OAIS-PC Involvement

- Buyer to include end user’s suggested supplier Buyer to include end user’s suggested supplier in sending the RFQin sending the RFQ

OAFA-AP and OAIS-PCOAFA-AP and OAIS-PC

RP initiators / OAIS-PC RP initiators / OAIS-PC

BuyerBuyer

By end of 2007By end of 2007

On going / On going / implementedimplemented

On goingOn going

B. ProcedureB. Procedure No procedure in No procedure in returning RPreturning RP

Limit number of line Limit number of line items per RPitems per RP

- Develop a procedure in returning RPDevelop a procedure in returning RP

- Align RP approval hierarchy with OAIS-PC - Align RP approval hierarchy with OAIS-PC PO approval hierarchyPO approval hierarchy

- RP initiators should limit the number of line - RP initiators should limit the number of line items per RP to 20.items per RP to 20.

OAIS-PCOAIS-PC

OAFA-APOAFA-AP

End-userEnd-user

On going On going

Included in the Included in the AO revisionAO revision

On goingOn going

C. OthersC. Others Outdated / obsolete or Outdated / obsolete or incorrect specificationsincorrect specifications

- RP initiators should update / indicate correct - RP initiators should update / indicate correct specifications and description of items being specifications and description of items being requested.requested.

End-userEnd-user On going On going

Insufficient budget Insufficient budget estimatesestimates

- Add 10% to the last acquisition cost or to the Add 10% to the last acquisition cost or to the internet price in the RP to cover possible inflation internet price in the RP to cover possible inflation cost and add another 10% (indent orders) for the cost and add another 10% (indent orders) for the shipping cost.shipping cost.

- End-user may seek assistance on the pricing End-user may seek assistance on the pricing with OAIS-PC prior to the initiation of RP.with OAIS-PC prior to the initiation of RP.

End-userEnd-user

End-userEnd-user

On going On going

On goingOn going

2929

IMPROVEIMPROVEFAILURE MODE and EFFECT

ANALYSIS (FMEA)

Potential Failure Mode and Effects AnalysisPotential Failure Mode and Effects Analysis(Process FMEA)(Process FMEA)

Item / Item / ProcessProcess

Potential Potential Failure Failure ModeMode

Potential Potential Effect(s) Effect(s) of Failureof Failure

Potential Potential Causes of Causes of

FailureFailure

Current Current Process Process ControlControl

Recommended Recommended Action(s)Action(s)

Responsibility Responsibility & target & target

Completion Completion DateDate

Action ResultsAction Results

SE

VS

EV

PR

OB

PR

OB

DE

TD

ET

RP

NR

PN

Actions Actions takentaken

New

N

ew

SE

VS

EV

New

N

ew

OC

CO

CC

New

N

ew

DE

TD

ET

New

N

ew

RP

NR

PN

Approved RP Approved RP with Correct with Correct SpecificationsSpecifications

RP not RP not processprocess

Returned Returned RPRP

66 Wrong Wrong SpecificationsSpecifications

22 NoneNone 33 3636 1. Initiator should 1. Initiator should ensure correct ensure correct specifications are specifications are indicated in the indicated in the RPRP2. Approver to 2. Approver to check check specifications specifications before approving before approving RPRP

End – userEnd – user RP initiator & RP initiator & approverapprover

Added to Added to the the processprocess

66 11 22 1212

Approved RP Approved RP with Correct with Correct estimated estimated costcost

RP not RP not processprocess

Returned Returned RPRP

66 Estimated Estimated cost not cost not sufficientsufficient

33 NoneNone 44 7272 1. Initiator should 1. Initiator should ensure adequate ensure adequate estimated costs estimated costs are indicated in are indicated in the RP by the RP by providing providing sufficient sufficient allowance in allowance in costing.costing.2. Approver to 2. Approver to check estimated check estimated costs before costs before approving RPapproving RP

End – userEnd – user RP initiator & RP initiator & approverapprover

Added to Added to the the processprocess

66 22 33 3636

SEV – SeverityPROB/OCC – probability of occurrenceDET – DetectionRPN – Review Risk Priority Numbers: prioritize item that requires additional quality planning or actions

3030

Improved Sigma LevelIMPROVEIMPROVE

Process Sigma Computations:Process Sigma Computations:

Nos. of transactionsNos. of transactions 8888

Nos. of defectsNos. of defects 1212

Calculation ResultsCalculation Results

DPMODPMO 136,364 136,364

Defects (%)Defects (%) 13.64%13.64%

Yield (%)Yield (%) 86.36%86.36%

Process Sigma LevelProcess Sigma Level 2.602.60

3131


Count

Perc

ent

REASONSCount 10 2

Percent 83.3 16.7Cum % 83.3 100.0

Specs.Budget

12

10

8

6

4

2

0

100

80

60

40

20

0

Pareto Chart of REASONS

3232


Count

Perc

ent

OFC/DEPTCount

33.3 25.0 8.3 8.3 8.3 8.3 8.3Cum % 33.3 58.3

4

66.7 75.0 83.3 91.7 100.0

3 1 1 1 1 1Percent

SELMEARDDERCBOISTFM

12

10

8

6

4

2

0

100

80

60

40

20

0

Pareto Chart of OFC/ DEPT

3333

Comparison of Sigma LevelsIMPROVEIMPROVE

Process Sigma ComputationsProcess Sigma Computations

Previous Improved Difference

Nos. of Transactions 725 88

Nos. of Defects 162 12

Calculations Results

DPMO 223,448 136,364 (87,084)

Defects (%) 22% 13.64% -8.70%

Yield (%) 78% 86.36% 8.70%

Process Sigma Level 2.26 2.60 0.34

3434

ControlRisk Assessment MatrixRisk Assessment Matrix

Risk Assessment MatrixRisk Assessment Matrix

Control FactorControl Factor Critical IssuesCritical Issues Proposed SolutionProposed Solution RiskRisk RemarksRemarks

A. PersonnelA. Personnel 1. Education / Training 1. Education / Training & Familiarity with & Familiarity with OracleOracle

Conduct regular training to all RP initiatorsConduct regular training to all RP initiators

No RiskNo Risk

Most of RP initiators claimed that they Most of RP initiators claimed that they do not receive formal training in RP do not receive formal training in RP initiation. OAFA-AP and OAIS-PC will initiation. OAFA-AP and OAIS-PC will conduct training in RP initiation.conduct training in RP initiation.

- Early Procurement Involvement- Early Procurement Involvement- Buyer to include end user’s recommended Buyer to include end user’s recommended supplier in sending the RFQsupplier in sending the RFQ- Re-visit procedure in returning RP and RP Re-visit procedure in returning RP and RP approval hierarchy approval hierarchy

No RiskNo Risk

To guide and help end-user in initiating To guide and help end-user in initiating complete and correct RP (correct complete and correct RP (correct justifications, specs., estimates, etc.)justifications, specs., estimates, etc.)

B. Procedure / B. Procedure / PolicyPolicy

Guidelines for Pre-Guidelines for Pre-initiation of RP.initiation of RP.

End-user to provide guidelines in the pre-initiation End-user to provide guidelines in the pre-initiation of RP. OAIS-PC to help in the providing of RP. OAIS-PC to help in the providing guidelines.guidelines.

No RiskNo RiskThis will eliminate errors in initiating RP This will eliminate errors in initiating RP in oracle.in oracle.

Limit number of line Limit number of line items per RPitems per RP

RP initiators should limit the number of line items RP initiators should limit the number of line items per RP to 20.per RP to 20. No RiskNo Risk

RPs with more line items are prone to RPs with more line items are prone to mistakes and errors. mistakes and errors.

Risk Risk Identification:Identification:

High RiskHigh Risk - is one in which issues exist that are beyond team's control, there is no plan for resolution or has a low probability of successful resolution. - is one in which issues exist that are beyond team's control, there is no plan for resolution or has a low probability of successful resolution.

Low RiskLow Risk - is one in which issues exist that are within team's control, has a plan for resolution and has a high probability of successful resolution. - is one in which issues exist that are within team's control, has a plan for resolution and has a high probability of successful resolution.

No RiskNo Risk - is considered to have either no risk or even though there is an issue, experience indicates that it can be solved within the normal course of design. - is considered to have either no risk or even though there is an issue, experience indicates that it can be solved within the normal course of design.

3535

Control Mistake ProofingMistake Proofing

Reduce incidence of returned

Request for Purchase (RP)

User-Unit OAIS-PC Supplier Timing Mistake Proofing

ImplementationStatus

11 RP initiators to check carefully the specifications of item/s requested and adequate allowance is provided in the estimated cost of the item.

The number of items per RP shall be limited to 20 items.

X

Every time RP is initiated

The first approver should check the specifications, estimated cost of the item/s requested and the number of items per RP (max of 20 items per RP). Please see checklist in the following slide

On-going

3636

Control Control SheetControl Sheet

Proposed Solution Effective Date Timing Responsibility

11 Early OAIS-PC Involvement Jul 07 (implemented) Every time there is a request from user unit.

OAIS-PC (NOs)

22 OAIS-PC to develop a procedure in returning RP

Sep 07 (implemented) Every time RP is returned

OAIS-PC

33 RP approval hierarchy should be aligned to the PO approval hierarchy.

As soon as the AO for OAFA-AP is approved

Every time RP is initiated it will go thru the hierarchy

OAFA-APMs. Miles Aquino

44 Buyer to include end user’s suggested suppliers in the RFQ.

Aug 07 (implemented) Every time an RFQ or RFP is made, as applicable

OAIS-PC (Buyers)

3737

Control Control SheetControl Sheet

Proposed Solution Effective Date Timing Responsibility

55 RP initiators should:(a) Add 10% to the last acquisition cost or to the internet price in the RP and add another 10% (indent orders) for the shipping cost.

(b) Update description / specifications of the items they are requesting as applicable.

(c) Limit the number of line items per RP to 20.

(d) End-user may seek assistance on the pricing with OAIS-PC prior to the initiation of RP.

Aug 07 (implemented) As applicable User unit

66 Training for the End-user on a regular basis (semi-annual)

Before the end of 2007 Every six months there after

OAFA-AP and OAIS-PC

3838

Control Stakeholder AnalysisStakeholder Analysis

STAKEHOLDER ANALYSIS FOR REDUCTION OF INCIDENT ON RETURNED RP

Reduce the Incident of Returned Request for Purchase (RP)

Stakeholders Attitude Influence Actions

Estimate Confidence Estimate Confidence

1. RP Preparer ++ √ M √ Involved as co-researchers and co-actors

2. RP Approver ++ √ H √ Direct participation

3. Buyer ++ √ M √ Involved as co-researchers and co-actors

4. PO Approver ++ √ H √ Directly involved in decision-making

5. OAS Management

++ √ H √ Directly involved in decision-making

5 Category Code of Stakeholder's Attitude from Supportive to Opposed (Column 2)

++ Strongly in favor

+ Weakly in favor

O Indifferent or undecided

- Weakly opposed

- - Strongly opposed

Confidence regarding estimate in Column 2

√ Fully confident

? Reasonably confident

?? An Informed guess

??? Wild guess

3 Category Code of Stakeholder's Influence

H High; a person or group has power of veto, formally or informally

M Medium; could probably achieve the goals against the person's or group's opposition, but not easily

L Low; a person or group can do little to influence the outcomes of the intended actions

3939

Control Financial SavingsFinancial Savings

SOFT SAVINGSReduction on incident of returned Purchase Requisition (RP)

I. Hard Savings – None

II. Soft Savings: US$5,242.32

1. Reduction in Transaction Cost:– A 50% reduction on incident of returned Purchase Requisition (RP) will free up end users’ time in re-doing RPs, which would result reduction in usage costs (i.e. amount of time on computer system, use of electricity, etc.). This will result in a saving of US$2,621.16 for one year (please see next slide for the computation).

2. Avoidance of Capacity Enhancement or Increase Efficiency:– Mitigating or eliminating the incident of returning the RP can free up staff of repeating the process of creating/re-doing an RP. This can create opportunity for them to attend on other important work to improve productivity. Reducing the incident of returned RP by 50% will collectively free up 108 hours of the RP initiators and approvers’ time for a year which could be used to attend to more strategic endeavors. This efficiency will translate to an additional savings of US$2,621.16 per year.

3. Increase Customer Satisfaction: – Returning RP is considered as one of the bottlenecks in timely processing of PO. Reducing or minimizing this bottleneck will result in a timely processing of POs which in turn lead to a timely delivery of Goods and Services. This will provide the end user with the opportunity to maximize utilization of the said Goods or Services which will result in increase customer satisfaction.

4040


Cost Analysis for Transaction Cost

Under Normal Process

(A)

Under Six Sigma (50%

reduction)(B)

Savings(A-B)

Staff Level *Annual Salary Matrix of SS (Php)

US Dollar Equivalent

*Annual Salary

Matrix of PS

L4 548,645.00 $11,748.29 $112,300.00

A Total number of RPs returned for 6 months 162 81 L5 642,775.00 $13,763.92 $126,600.00

B Cost of preparing RPs $16.18 $16.18 L6 763,870.00 $16,356.96 $143,700.00

C Total cost of returned RPs $2,621.16 $1,310.58 L7 919,650.00 $19,692.72 $160,500.00

D Total Savings for 6 months $1,310.58 L8 1,120,050.00 $23,983.94 $178,300.00

E Total Savings for 12 months $2,621.16 L9 1,377,850.00 $29,504.28 $201,400.00

Data: Time Value 9A 1,678,500.00 $35,942.18 -

i. Average time to prepare RP 30 minutes $3.90 9A2 2,081,345.00 $44,568.42 -

ii. Average time to review/approve RP 10 minutes $12.28 Total 9,132,685.00 $195,560.71 $922,800.00

iii. Total number of ADB working days per year 261 Average 1,141,585.63 $24,445.09 $153,800.00

iv. Cost of preparing RP $16.18 Daily Rate 4,373.89 $93.66 $589.27

Hourly

Rate 546.74 $11.71 $73.66

* Taken form 2006 Salary Matrix of BPHR

4141


ParticularsUnder

Normal Process

Six Sigma Process

(50% reduction)

Time Rate

A. RPs returned in 6 months 162 81

B. RPs returned in one year 324 162

C. Average time to prepare RP (minutes) 30 $ 3.90

D. Average time to review/approve RP (minutes)

10 $ 12.28

E. Average time to prepare, review and approve RP (minutes)

40 $ 16.18

F. Total number of minutes per year 6,480 $ 2,621.16

G. Equivalent in hours per year 108

H. Rate per hour $ 24.27

SAVINGS per year $ 2,621.16

Cost Analysis for Avoidance of Capacity Enhancement or Increase Efficiency

4242

Control Checklist for RP verifierChecklist for RP verifier

Checklist in verifying RPs

Verifier to check the following:

• Estimated unit price per line item (should be sufficient to cover forex fluctuation, inflation and shipping cost);

• Budget account number charging code;

• Specifications, must be updated;

• Description, complete and correct;

• Line item type should be the same as line item category;

• Justification, if branded or sole source;

• Note to buyer, if any

4343

Control Guidelines in Returning RP

Guidelines in Returning RP

Salient Points in the Guidelines in Returning Request for Purchase (RP)

1. The Buyer must notify via email and follow via phone the end user or RP preparer that there is a substantial change to be made to the RP;

2. Response time by end user or RP preparer: 2 days (If no response in 2 days, the buyer will return the RP);

3. For multiple line items, the Buyer should prepare the PO for items within the allocated budget and/or with complete specifications before returning the RP;

4. Buyer to check notification regularly;

5. Follow-up should be done to confirm whether the RP will be amended or will be cancelled.

4444

END OF PRESENTATION

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