CASE: INTENSE TECHNOLOGIES LTD

Intense Technologies Ltd (ITL) is a small technology firm founded by three promising Engineering graduates of Kombucha University: Rick, Emma and Roberto.

During their time together in school, they developed a self-driving lawnmowerThe Grassassin-- that can mow all sorts of turfed terrain with great precision, speed and safety, all while being operated remotely by smartphone. While at school, they won an innovation prize for their prototype and garnered lots of buzz on social media.

With the help of Rick's spouse Anna (who took Accounting in High School) they developed a business case and obtained fundingthrough hundreds of small investors onXtremeCrowdCash.com to start up ITL.

While they all have equal shares in the company, Rick is the CEO,Emma is the Chief Technology Officer, and Roberto is the Chief Operating Officer. They lease a converted warehouse in a run-down but trendy part of Ottawa, a building that serves as both their warehouse and their super-cool office space. With some of their venture capital they purchased a variety of table games and an expensive Italian espresso machine. Their Friday afternoon theme-parties are already famous throughout the Ottawa Tech sector. There is a constant buzz of activity as employees work on developing new features for the Grassassin app while trying to pull the perfect macchiato.

To keep costs down, manufacturing was outsourced from the start to Sahel Technologies, acontract manufacturing firmin Burkina Faso. It takes three months for a container full of 3000 mowers to be shipped from the factory in Ougadougou to the port of Montreal, and then trucked to the ITL warehouse in Ottawa. Because of the time it takes to get new product, Roberto estimated that they need to keep a minimum stock of 3500 units in their warehouse/office. When a customer order is received at the office, ITL records the order details, grabs the required number of units from the storage area, then inspects, configures, packages and ships them to the customer. See Value Stream Map below.

Originally, not much thought was given to the business of fulfilling orders, so the owners simply asked the Software Developers to do this work. Unfortunately, the developers' nocturnal work habits and lack of social skills forced Roberto to hire a full-time Order Taker dedicated to order entry.

Roberto keeps track of orders, shipments and invoices in a complex Excel spreadsheet - it is on his "to do" list to share this with Anna. Based on the popularity of their latest TikTok video, Roberto ordersthree containers full of units (9000 in total) to ensure that sufficient supply is on hand when the product goes completely "viral", which, based on their buzz on social media, he's sure it will.

The day the first three containers of product were delivered from Burkina Faso was an exciting one - Mayor Watson, representatives of the local tech community and media attended the celebratory Toga party and Grassassin demonstration. Unfortunately, no one had thought about the amount of storage space required for 9000 units, and, even withboxes of product stored in the office area, the table tennis table still had to be moved into the hallway.

To date, there has been stable demand for the product, with an average of 50 units being ordered per day. ITL has been able to charge the price estimated in the business case.Demand spiked tremendously when the product was featured on The Shopping Channel last Tuesday. When that happened, a backlog of 750 orders waiting to be processed quickly formed at the order-taking desk, creating a challenging workload on the order taker. He could not handle the stress and quit the next day. A number of software developers had to step in. The software developers hated processing orders. Even though they had plenty of product on hand in storage, it took them two months to get rid of this backlog of orders, hire another order taker, and return to their promised 3-day turnaround time from order to shipping.

Despite some shipping delays, customers are generally pleased with the Grassassin's performance, although Emma notices one day that a bunch of them have been returned because of performance problems. Emma investigates the returned items and discovers that assembly problems are occurring in 30% of all units.She contacts the supplier in Burkina Faso, and they reassure her that all will be corrected "immediately". Despite their verbal reassurances, she is doubtful. Meanwhile, all their units for the next three months are already in transit and so they keep receiving 30% defective units.Roberto hires temporary students to open all the inventory on-hand, find and correct the problematic ones and then re-package the product before they are shipped to the customer.

There was now a delay in getting replacement packaging material because it had to come from Sahel's supplier in Thailand. By bringing the table tennis table into the office area and using it as a re-packaging workspace, and by working the students up to 14 hours per day, Roberto thinks they will have sufficient defect-free product to keep up with demand.

Some of the software developers complain about students moving pallets of mowers from the storage into the office area, but Roberto believes from experience that software developers are always complaining about something. Of more concern to him are the complaints from customers who received defective product that had clearly been returned from a previous customer!

Using the table tennis table as a workspace required moving the foosball and air hockey tables into storage, however, the espresso machine and climbing wall are still accessible.

At the end of the first quarter, Anna tries to compare actual business performance to the estimates in the original business case. She realizes that Roberto's complex spreadsheets of orders, shipments and invoices have all sorts of colourful graphs and calculations about the projected inventory levels required every hour, but very little about actual cash, payables and receivables. She has to spend a few days gathering information from different members of the team, and another few days to re-format Roberto's spreadsheet into something that makes sense to accountants. She finds that although revenue met plan, and the purchase price from Sahel Technology was the same as in the business case, ITL is barely breaking even.

At first, Anna cannot believe the results, and she checks and re-checks the numbers. She takes them to Rob and Rick, and they are incredulous. With more than 125,000 followers on Twitter, and a 98% approval rating on their YouTube Channel, they are baffled by the gap between business case profit projections and their actual results.

Intense Technologies Limited: Grassassin Value Stream Map Legend: 3000 units/container PT = Processing Time 6234 CT = Cycle Time WT = Waiting Time ET = Elapsed time C/A = Complete and Accurate% Warehouse 3 months lead time = Inventory (units of work)