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As a business grows, the need for technology increases. However, technology comes with a cost—often quite a high price tag. So, it is important that we effectively manage our fulfillment processes to eliminate waste, whether it’s time, inventory, or simply antiquated processes. This article will focus on my journey when I inherited the fulfillment process for a very large company. Many of the steps I took in optimizing this process can be adopted regardless of the size of the business, or whether you decide to source internally or use an external value-added reseller to manage your fulfillment.
The problem I was faced with upon taking ownership of this process was a large organization with many different lines of business, all of whom controlled their own budget. The result was every business unit maintained their own stock of inventory separate from the others. As you can imagine, this resulted in a large financial outlay, not just in the cost of the physical products but in the administrative overhead being duplicated across business lines to forecast, procure, track, and dispose of technology assets.
As part of my Six Sigma Green Belt certification, we spun up a project to optimize how we manage technology assets. The first step of scrutinizing the process was developing a process map that clearly shows all of the inputs, outputs, tools, and teams involved. Once the process map was complete, we did a “waste walk” through each step, identifying which ones added value and which steps did not. Not all non-value-added steps can be removed, but many of them can, and we identified a number of areas that could be either eliminated or improved.
The first key improvement that jumped out at us was moving away from each business unit keeping their own inventory pools. Our goal was to create a common, near just-in-time inventory. This would significantly reduce the amount of inventory we needed on-hand to meet the needs of the business. However, this was also very much a cultural change, as many of the finance leaders of each segment questioned how we would fairly manage the product. After all, if they paid for it from their budget and then the employee terminated and the device was returned and repurposed, would they get a credit? This was a common question from nearly every business unit in the company, and we had to assure them that the new process would not only fairly distribute product but it would also result in a clear financial savings for them over time. With those assurances, we proceeded to the next steps.
The new process would have all stock centralized at a fulfillment warehouse. That stock would be initially charged to a holding account owned by IT Support. We would fulfill both new product as well as assets we would refurbish and redeploy. To manage this process, we worked with our development teams to build software solutions that would enable us to track assets as they shipped, assigning them to the appropriate business GL account as they left the warehouse. If the device was new, the business was charged for a new device; if the device was redeployed, they were charged only a small fee to cover any replacement peripherals and of course shipping charges.
This new process also meant we had to adjust how we approached forecasting and procurement. This saved the business valuable time and effort as they no longer had to be responsible for this function. Initially, we went with a simple run-rate model; over time, this evolved into a somewhat complex forecasting model that not only looked at the run rates, but also added a one-standard-deviation buffer. We scheduled regular meetings with finance and procurement to go over these numbers, which were adjusted based on inventory on hand vs. what the forecast indicated and also took into consideration outside factors like recently acquired businesses who may need product but were not yet integrated into the overall support processes. The advantage of this approach was if we overestimated this month, the following month’s order could be reduced. This enabled us to always keep our inventory at optimal levels—never too much, never not enough.
With the centralization of the fulfillment function, other support functions could also be moved into the fulfillment center. One of the first to move was repair. This freed our field technicians to focus on the customer. If a device needed to be replaced and repaired, the field staff would use a hot-swap machine from a small stock kept at the staffed sites. This got the customer up and running quickly, as they had a new machine that they kept; the non-functional device was returned to the fulfillment center where a centralized repair team could address the problem. The repair center analysts were all certified by the various hardware manufacturers to enable them to do complete repairs under warranty, which meant that we generally received a discount on all of our parts (in or out of warranty) as well as compensation from the manufacturer for doing the repair.
Likewise, all of the previously used equipment we received went through a triage process, where we addressed any cosmetic issues and ran diagnostics to ensure that the machine was fully functional. If the device passed triage, it went to cleaning and then into general inventory; if it failed any of the tests, it was shunted to repair.
Once in stock, the machines are available for the imaging and build process. The fulfillment center staff image each device and then make it available to provisioning teams in the field to build for various functional lines, such as new hire, break/fix, or lifecycle replacements. Recent improvements have included implementation of automated processes that allow the customer to directly select a device from the service catalog and then automation processes will complete the build with little or no interaction needed from a provisioning analyst.
Gradually, as the advantages of a centralized fulfillment process became clear, more functions were moved into the fulfillment center, such as mobile devices, thin clients, and phones.
Ultimately, our journey through our fulfillment processes had significant and measurable results. It was more efficient, eliminating duplication of effort across lines of business. It reduced or avoided adding costs by centralizing a common inventory and allowed us to better prioritize and utilize our stock. Over time, reporting shows that the business concerns about the fair distribution of assets were satisfied—the breakdown of new vs. refurbished hardware has been consistently 50/50%. That reuse of deployable assets resulted in an annual cost avoidance of $30 million.
The customer experience improved as well. Rather than having a local field technician do the diagnosis and repair of a downed customer, they simply replaced the device with a new machine. The customer was up and running quickly, the defective machine went back to the fulfillment center for repair (and upon receipt a replacement machine for the hot swap was shipped back to the site), and the device was fixed and made available for the next client.
Regardless of whether you have an internal fulfillment process or if you use a value-added reseller, you can use these principles to examine your overall process and find those areas that don’t add value. Eliminate the ones that have the most negative impact to the process and you will see almost immediate results in efficiency and cost reduction.
Mike Hanson has many years of experience with IT leadership, having managed several different aspects of technology over the past 30 years. Today, he serves as global operations manager and leads the asset management and fulfillment teams for Optum, Inc. He has been involved with HDI for many years, as both a local chapter officer and as a past chair of the HDI Desktop Support Advisory Board. Follow Mike on Twitter @Mike_MiddleMgr.
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