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Monthly Billing Cycle-Time Example

Britz et al (1996, p4), Britz et al (2000, p7), and Hoerl and Snee (2002, p3) all describe the same example of an actual application of Statistical Thinking at a large corporation.   The corporation wanted to decrease the average monthly billing cycle time of about 17 days to the corporation target of 10 days.   A shorter time would improve the corporation’s cash flow and satisfy customer needs to more rapidly close monthly books.  Customers had complained that other competing corporations were not as tardy in submitting bills.

The initial review of the process revealed that three separate departments constituted the billing process.   Each department worked independently to perform their billing functions.   No one understood the entire billing process flow.   The corporation did not have a standard bill process operating procedure.  Members of three departments claimed that the billing time delays were due to the other departments. 

The initial step to improve the billing system was to develop both a systems map and a flow chart.   The systems map identified responsible groups and the information flow among the groups.   The flow allowed the construction of a production schedule for the monthly billing cycle.   The schedule:

·        listed the specific activities that had to be performed

·        identified the responsible group for each activity

·        specified due dates for each activity

The next step involved creating cross-functional teams to improve the performance of individual activities.   They recorded cycle times, and these cycle times highlighted problem areas. They developed solutions to minimize variations in the problem areas.  They documented the entire process and the procedures.   The documented process procedures helped reduce variation in the problem areas.  The documentation also helped in training new employees.

The corporation assigned a process owner to insure that they continued to realize the performance improvements.     

The result was a reduction in billing cycle time in a 5 month period from 17 day to 9-10 days.   That was almost a 50% reduction.   This result satisfied customers and generated annual savings of $2.5 million.

This example illustrates key features of Statistical Thinking.

·        Regarding the system as a process

·        Reducing variation

·        Using data to determine improvements for the system

References

  1. Britz, G., D. Emerling,  et al. (1996). Statistical Thinking, ASQ Statistics Division Special Publication
  2. Britz, G. C., D. W. Emerling, et al. (2000). Improving Performance Through Statistical Thinking. Milwaukee, WI, ASQ Quality Press.
  3. Hoerl, R. and R. D. Snee (2002). Statistical Thinking - Improving Business Performance. Pacific Grove, CA, Duxburry.
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