Consider the following process at a company of 800 employees in the early 1990s.

Almost any employee at the company can initiate a purchase request by filling in a form. The purchase request includes information about the goods to be purchased, the quantity, the desired delivery date, and the approximate cost. The employee can nominate a

specific vendor. Employees often request quotes from vendors in order to get the required information. Completing the entire form can take a few days as the employee often does not have the required data. The quote is attached to the purchase request. This completed request is signed by two supervisors. One supervisor has to provide a financial approval, while the other supervisor has to approve the necessity of the purchase and its conformance with the company’s policy (e.g., if purchasing a software tool, is it compatible with the company’s standard IT operating environment?). Collecting the signatures from the two supervisors takes on average 5 days. If it is urgent, the employee can hand-deliver the form, otherwise it is circulated via internal mail. A rejected purchase request is returned to the employee.

Sometimes, the employee makes minor modifications and resubmits the purchase request. Once a purchase request is approved, it is returned to the initiator of the request. The employee forwards the form to the purchasing department. Employees often make a copy of the form for their own record, in case the form gets lost. The purchasing department checks the completeness of the purchase request and returns it to the employee if it is incomplete. The purchasing department then enters the approved request into the company’s enterprise system. If the employee has not nominated any vendors, a clerk at the Purchasing Department selects one based on the quotes attached to the purchase requisition, or based on the list of vendors (also calledmaster vendor list) available in the company’s enterprise system.

Sometimes, the quote attached to the request has expired in the meantime. In this case, an updated quote is requested from the corresponding vendor. Other times, the vendor who submitted the quote is not recorded in the company’s enterprise system. In this case, the purchasing department should give preference to other vendors who are registered in the enterprise system. If no such vendors are available or if the registered vendors offer higher prices than the one in the submitted quote, the purchasing department can add the new vendor into the enterprise system.

When a vendor is selected, the enterprise system automatically generates a purchase order. The purchase order is sent to the vendor by fax. A copy of the purchase order is sent to the accounts payable office. This office, part of the financial department, uses an accounting system that is not integrated with the enterprise system, where purchase orders are stored.

The goods are always delivered to the goods receipt department. When goods are received, a clerk at this department selects the corresponding purchase order in the enterprise system. The clerk checks the quantity and quality, and generates a document called goods receipt form from the purchase order stored in the enterprise system. The goods are forwarded to the employee who initiated the purchase requisition. A print-out of the goods receipt form is sent to the accounts payable office. If there are any issues with the goods, they are returned to the vendor and a note is sent to the purchasing department and to the accounts payable office for archival.

The vendor eventually sends the invoice directly to the accounts payable office. A clerk at this office compares the purchase order, the goods receipt and the invoice. This latter task is called three-way matching. Three-way matching is time-consuming because the clerk needs to carefully investigate each discrepancy. The payment process takes so long that the company often misses the deadline for invoice payment and has to pay a penalty.

At the end, the clerk triggers the bank transfer and sends a payment notice to the vendor. Some vendors explicitly indicate in their invoice the bank account number to which the transfer should be made. It happens that the bank account number and name indicated in the invoice differ from the one recorded in the vendor database. Sometimes payments bounce back, in which case the vendor is contacted by phone, email or postal mail. If new bank details are given, the transfer is attempted again. If the issue is still not resolved, the accounts payable office has to contact again the vendor in order to trace the cause of the bounced payment.

1. What type of process is the above one: order-to-cash, procure-to-pay, application-to-

approval, or issue-to-resolution?

2. Who are the actors in this process? Who are the customers?

3. What are the tasks of this process?

4. What value does the process deliver to its customers?

5. What are the possible outcomes of this process?

6. Taking the perspective of the customer, what performance measures can be

attached to this process?

7. What potential issues do you foresee this process might have? What information

would you need to collect in order to analyze these issues?

8. What possible changes do you think could be made to this process in order to

address the above issues?