LT, Inc. started as a small, family-owned company. For a long time, owners managed most of the operations, including billing, and customers were happy Over time, the company grew steadily and acquired plants in the United States and many other countries. Most of its operations were departmentalized, and the accounting systems varied among the many companies LT acquired. While LT successfully dealt with most of the problems caused by rapid growth, it remained unable to get a grip on billing errors. The customer service and billing departments were often ooded with complaints about erroneous bills. The billing process at LT evolved over time, resulting in a lack of consistency among billing personnel. Customer order taking and billing procedures were confusing, inadequate and obsolete. Not all billing clerks had the same level of knowledge and training. A lack of documentation added to the confusion and aggravated the situation. Billing personnel followed the policies and procedures they thought were reasonable and did things the way they felt was right. To get a handle on its billing problem, LT appointed a Six Sigma team comprised of employees with various interdisciplinary backgrounds and expertise. The team discussed the problem, researched Six Sigma and lean tools and techniques, learned from other companies and consulted with experts in the eld. The rst thing the team did was study the billing process and prepare a owchart (see Figure 9.26). The team then reviewed how billing errors were resolved Most scenarios followed a similar path: A customer calls to inquire about a bill and listens to a pre-recorded message with menu options. The customer listens to several options that don't describe their particular problem and gets frustrated when the system only deals with select inquiries. After several minutes, the customer nally gets to speak to a customer service representative, but only after being put on hold or bounced from one representative to another, forcing the customer to repeat the problem several times. Finally, the customer is assured the problem will be corrected, only to have the next month bring the same bill, the same error, the same complaint, the same aggravation and, in the end, the loss of an annoyed customer. Figure 9.26. Flowchart of LT Billing Process Mail Telephone Orders received Salesperson Order preparation Order verification Order No complete? Yes New Yes Set up customer customer account NO Order sent to accounting and shipping Accounting prepares Shipping invoice checks stock No Items Yes in stock Back order Shipment placed made Source: Reprinted with permission from Lakshmi U. Tatikonda, "A Less Costly Billing Process," Quality Progress, January 2008, 31-39. Copyright@ 2008 American Society for Quality. No further distribution allowed without permission. A further study revealed many different types of billing errors:Afurther study revealed many different types of billing errors: Bills with wrong prices and charges . Bills sent to the wrong customer . Bills sent to the wrong address - Double billing and late billing - Billing for unordered goods - Billing for returned goods . Billing before the goods were shipped Using causeand-effect diagrams, the Six Sigma team brainstormed potential causes and explored them in depth (see Figure 9.27). A Pareto analysis showed that 70 percent of the errors were due to an incorrect amount on the bill or billing for unordered goods. Figure 9.27. Cause-and-Effect Diagram for Billing Errors Data input Billing clerks Wrong information \\ Wrong file mounting Lack of training: Misunderstanding from order processing of instructions Order entry unclear Lack of supervision Infrequent price update Wrong data entry Failure to follow Carelessness Obsolete database corporate billing procedures Erroneous Unclear instructions billings Inadequate communication between sales, order processing Lack of bill authorization Lack of data and billing departments verification Lack of order taking verification Outdated procedures No written procedures Lack of feedback Lack of controls Procedures Controls Source: Adapted from Lakshmi U. Tatikonda, "A Less Costly Billing Process," Quality Progress, January 2008, 31-39. Copyright @ 2008 American Society for Quality. Reprinted by permission. To gain a better understanding of the sources of communication errors, the team members decided to walk through the billing activities. Customer orders arrived via mail, fax and phone. At each step, they were batched and queued for processing. The main steps included order taking (folders made for each customer), order preparation (current and new customers sorted, information added), order pricing, shipping, and billing. Table 9.5 provides a detailed description of the activities.Data and Customer Order Preparation Billing Orders via mail, fax, phone, and e-mail. Receive folders with customer order information. Receive copy of customer order folders from order preparation. . Average daily orders: 200/day Sort folders according to new and current customers. Send new customer folders to credit check. Send new customer folders to data processing. Central mailroom Receive customer folders from credit check with credit Receive new customer folders from data processing. status. Receive outside mail. . Move customers order folders to order verification. Sort the customer folders according to acceptable and Sort according to departments. not acceptable credit Receive folders from order verification. Put in boxes. . Send the customer folders with not acceptable status . Make two copies of customer order folders. back to order takers. Deliver to departments. Send one copy of the order to shipping and one copy to Send the acceptable customer folders to sales tax . Stamp postage and send outgoing mail. billing. department. . Receive customer folders from sales tax. Order taking Data processing . Calculate the total amount (purchases, taxes) to bill. . Receive orders from customers and central mailroom. Receive new customer folders from order taking. . Enter all the necessary data into computer and print Open customer mail orders. Batch the folders, assign a customer number and invoices twice a month. create customer record. Record customer phone orders on paper. Address envelopes, fold, insert invoices and close Add new customer number and other information to Move the envelopes to central mailroom twice a day. Sort all orders by customer name and stamp date. customer folders. Prepare folders with customer order information. Batch customer folders to order preparation once a day. Shipping Move batch of customer orders to order preparation . Receive customer order folders from other preparation. once a day. Order verification . Pick and pack the items in the order. Credit check . Receive customer order folders from order preparation. Print and paste address labels on the boxes. Check stock availability. Check customer credit once a week. . Ship the packages twice a day. Make price estimates. Add credit status to folders. Add price estimates to customer order folder. Sort customers according to acceptable and not acceptable credit . Move the folders to order preparation once a day. Batch and move the sorted folders to billing.Using the information provided, outline specific steps that you would recommend to improve the process. Include a list of performance metrics that you would recommend that the company monitor in the future to track the efficiency and effectiveness of the process. Summarize your results in a formal report to the company's management