Posie is a large business which manufactures furniture. It is made up of two autonomous divisions in Deeland. The manufacturing division purchases raw materials from external suppliers, and performs all manufacturing and packaging operations. All sales are made through the retail division which has 95 retail stores in Deeland, as well as through Posie's own well-developed website. Posie has retail operations in eight other countries as well as in Deeland.

These overseas businesses operate as independent subsidiaries within the Retail Division, each with their own IT and accounting functions.

The furniture is sold in boxes for customers to assemble themselves. About 10% of the products sold by Posie are purchased already packaged from other manufacturers. All deliveries are outsourced through a third party distribution company.

Posie's corporate objective is to maximise shareholder wealth by producing 'attractive, functional furniture at low prices'. This is how customers generally perceive the Posie brand. The CEO of Posie is concerned about increasing levels of returns made by customers and increasing numbers of consumers complaining on online forums about products purchased from Posie.

Concerned about the impact on the Posie brand and the cost-leadership strategy, the CEO has asked you as a performance management expert to help Posie implement the six sigma technique to reduce the number of products returned and in particular to define customers' requirements and measure Posie's existing performance. The production director has been appointed to sponsor the project and you will be supported by a small team of managers who have recently received training in six sigma. The board member responsible for manufacturing quality recently resigned because she thought it was unfair that the manufacturing division was being held responsible for the increased level of customer returns.

You have been given access to some information concerning the reasons why customers return goods to help you measure existing performance in this area (Appendix 1). This is an extract from the management reporting pack presented to the board at their monthly meetings. The returns data, however, are only compiled every six months due to the lengthy analysis required of data from Posie's overseas retail operations. It is included twice a year in the board report along with the KPIs for customer satisfaction. The last time this information was produced 93% of customers indicated they were satisfied with the quality of the manufacture of Posie's products.

The CEO has heard that six sigma requires 'large amounts of facts and data'. He suggested that the returns data contain insufficient detail and that as part of your project you may need to do more analysis, for example, on why customers are not satisfied with the manufacturing quality.

He also added, 'I'm not sure that our current IT systems are capable of generating the data we need to identify which responsibility centres within the manufacturing division are the root causes of the problem of customer returns. We are planning to change the designation of the overseas retail businesses from profit centres to revenue centres, but again we need to know first how this will affect the information requirements of the business and any potential problems with doing so.'

Appendix 1

Reasons given by customers for returning goods

Category Reason for return of goods % Responses

1 Difficult to assemble or pieces missing 48%

2 Goods arrived damaged 14%

3 Goods were not as described or were defective 25%

4 Goods were of poor quality or no longer wanted 11%

5 Arrived late 2%

Total 100%

Required:

(a) Advise the board how the six sigma project at Posie to reduce returns from customers could be implemented using DMAIC methodology.

b) Evaluate the impact on DM,s information requirement arising from the need to identify and improve on the level of customer returns