Using lean principles to streamline the quotation process: a case study

The quotation process tightly links the manufacturer and its suppliers and customers on a supply chain. An excellent record of successful quotes not only benefits trading partners, but also positions the manufacturer on the market in terms of its responsiveness, customer service, efficiency, and competitive pricing. In the existing literature, lean principles are generally applied to manufacturing only, this paper relies on a case study to show the application of lean manufacturing principles to the administrative function of the quotation process. In addition, the case demonstrates that electronic solutions are the best remedies for streamlining the quotation process to reduce the total cycle time ± the basis for providing competitive prices and excellent customer service. Automatic and Robotics Research Institute, 2001). In a manufacturing context, the major lean philosophy focuses on generating just what is needed, when it is needed, in the amount needed with only the required material, labor, equipment and space (Heizer and Render, 1999; Vollmann et al., 1997). Basically, waste in manufacturing environments is anything that consumes resources yet produces no value. What lean concepts are relevant in the case study? Lean principle suits very well in the context of the price quotation process (Knill, 1999), and the same ideas formulated for use in monitoring physical production apply `̀ equally to product development and order-taking’’ (Womack and Jones, 1996). In what follows, we concentrate on two important concepts of lean manufacturing principles that are applicable to this paper: 1 Cycle time. Frequently, a firm’s responsiveness is evaluated by the cycle time. A widely used measure is the receipt-to-receipt time, which is the actual elapsed time it takes a quote to be processed, including all queue time, downtime, and others. By averaging the receipt-to-receipt time of all quotes completed (or at least a sizable sample of them), the average cycle time for a quote can be calculated. 2 TAKT time. Equivalent to pace, this is the rate at which the customer requires the product. TAKT time defines the speed of the manufacturing lines and the cycle times for all manufacturing operations. The following function indicates how TAKT time for a particular demand rate is calculated: TAKT time ˆ Available work time per day Daily required demand ...quotes=day† ...1† The TAKT time can be used to compare with the cycle time in workload balancing. Ideally, cycle time should be close to but not exceed TAKT time. If the cycle time is less than TAKT time, the quote team is said to keep pace. If the cycle time is greater than TAKT time, then the available work time must be increased through adding quote team members, overtime or a second shift. If the available time cannot be increased enough, efforts must be made to eliminate wastes in the process. A case study at Westfield Gage, Inc. In this section, a case study is offered to illustrate how theories can be actually applied to practices. Our study was conducted at a company, named Westfield Gage Incorporated (WGI), between October 1999 and March 2000. The study team consisted of two undergraduate students majoring in industrial engineering and two faculty advisors. In what follows, the company’s profile is briefly described. The company background Started in 1943, WGI, located in Westfield, Massachusetts, has grown to be a leading domestic and international supplier of precision parts and assemblies for military, aerospace, and commercial equipment. With the recognition of the competition from the domestic as well as international suppliers, Figure 1 The strategic role of quotation process in supply chains [ 514] Conan M. Buzby, Arthur Gerstenfeld, Lindsay E. Voss and Amy Z. Zeng Using lean principles to streamline the quotation process: a case study Industrial Management & Data Systems 102/9 [2002] 513±520 WGI has devoted a great deal of effort to improving every aspect of their internal processes. To keep up with the growing variety of customer needs and the customers’ desire for low price, the company has recently started a number of endeavors aiming at eliminating wastes and reducing costs in every aspect of the production cycle. The first internal activity selected for investigation is the administrative quoting process. The objectives of the study include establishing an optimal process flow for quoting, identifying appropriate data collection tools, and standardizing information retrieval. Current quotation process and problems The general flow of the quotation process at WGI is divided into eight separate tasks and each member of the four-person quote team is responsible for the completion of one or more of these tasks. The flow of the process begins with `̀ initial log in’’ and ends with `̀ customer copy type up’’, where the final production quantity, parts quoted for, and the date that the quote will be completed. Table I provides the order of the quotation process tasks, the quoting team members, and the descriptions of tasks. To get an idea about the company’s performance in completing the quotes, the past seven months of quote delivery data are collected and are divided into three categories: quotes delivered late early; and on time. Table II shows the percentage of each category in each month. It should be pointed out that the data of September 1999 are ignored, because a special event took place that month, leading to a result that is significantly distorted. Table II implies that currently, on average, only 60 per cent of all quotes during the seven-month period were returned on time or early. This means that 40 per cent of quotes were returned late to customers, and out of which approximately 10 per cent received no response. Imagine if manufacturing were to deliver 40 per cent of parts late to customers, the company would not be in business for long. The current response rate was one of the major problems that greatly concerned the top management at WGI and was expected to resolve as soon as