Lean Fulfillment in Financial Services

Lean Fulfillment in Financial Services WCBF’s 4th Annual Lean Six Sigma Summit May 1, 2008, Track I Aaron Bruner, PE Nathan Guerdet Wells Fargo Financial

Introducing Wells Fargo Financial – Retail Services • Our financing allows clients such as Slumberland to offer “12 Months No Interest and No Payments” • We maintain clients by funding and servicing their customers’ transactions We Provide Private Label Credit Card Services for Clients

Introducing the Forms Management Department • Documents and forms managed in Des Moines • We supply forms to 30,000 retailer locations • Paper applications are supplied so that customers can apply for financing and agree to program terms Wells Fargo Financial Retailer Services in Des Moines

Forms Management –Overview • We have custom applications for over 200 large clients • We also provide applications for many industry programs • We manage the print, storage, fulfillment and shipping of all paper documents Paper Credit Card Application

Forms Process Improvement was Necessary • 1 to 10 year inventory on hand • High scrape rate • Too many rush orders – Large re-supply project in early ‘08 • Complex ordering process • Poor cost management Pallets of Forms Stored in the Building Basment

Supply Chain Project Steps • Process work-out with all team members • Build SIPOC • Create detailed process flow chart • CTQ chart • Fishbone diagram • Record data • Develop vendor selection proposal • Roll-out new processes for future state • Six sigma control chart • Results

S.I.P.O.C. Forms Process From Supplier to Customers

Detailed Process Flow Chart Too Many Process Steps

Critical to Quality • Inventory turns • Decrease process time Cycle time Right Sized Inventory • Forecast with 80% accuracy • Less than 10% spoilage Quality • Limit cost of safety stock • Keep cost of production even throughout the year Cost

Cause & Effect / Fishbone Diagram Measurements Materials People X Within each industry app type, there are different versions for each tier. X Communication between groups is limited. Low stock notification from Info-Plus is “off” “Fully loaded” cost of producing stock is not taken into consideration. No disciplined forecasting process x X X Output It’s “cheaper” to produce larger quantities. We save money by making fewer shipments to dealers so we send large quantities. Sales, Marketing dictates how much supply should be sent to dealers but don’t pay for shipping or production X x The annex cannot produce 28” apps so larger quantities are produced to accommodate for outsourcing lead time Info-Plus software is inadequate as an inventory management tool. High Inventory levels Seasonality for industries causing spikes in usage N X x x Environment Methods Machines X – Major variable x – Minor variable N – Noise (something that can’t be controlled)

Cause & Effect / Fishbone Diagram Measurements Materials People 3 Within each industry app type, there are different versions for each tier. 4 Communication between groups is limited. Low stock notification from Info-Plus is “off” “Fully loaded” cost of producing stock is not taken into consideration. No disciplined forecasting process 1 1 1 It’s “cheaper” to produce larger quantities. We save money by making fewer shipments to dealers so we send large quantities. Sales, Marketing dictates how much supply should be sent to dealers but don’t pay for shipping or production The annex cannot produce 28” apps so larger quantities are produced to accommodate for outsourcing lead time Info-Plus software is inadequate as an inventory management tool. 3 3 Seasonality for industries causing spikes in usage Output High Inventory levels 1 4 3 Environment Methods Machines

Data Collection • Application demand has increased significantly, but supply process has not adapted In-house Process Could Not Handle 2 Million Apps

Data Collection • In-house supply process • In-house Process • Submit order to printer • Ship forms to Retailer • Store in Retailer basement • Send some forms to “Annex” • Submit some orders to “Annex” • “Annex” send to basement • Replenish remaining orders from basement Poor In-house Fulfillment Process

Data Collection • In-house Supply Process • Flooring Retailer Example • Retailer submitted 400 apps in ‘07 • 6 week re-order point 1800 • Recorded on-hand inventory 4200 • Actual on hand inventory 40000 • i.e.: Demand and Supply Problem Exists Wasted Supply Building up in Basement

Supplier & Inventory Locations • 2 Outside and 1 Inside Print Vendor • 5 Inventory Storage Locations Vendor 1 Vendor 2 Basement 6th Floor In-House Vendor

High Level Problem Summary • Currently have 3 print vendors and store the supplies in 5 different locations • Coordinating Pricing, inventorying, billing, reporting, and tracking very difficult and expensive • There are no formal contracts in place to control costs and govern the relationships

Selection Criteria • We need to reduce order-to-delivery cycle time and the overall cost of forms • Need more accurate order and inventory management • Need web-based, automated ordering to reduce costs • Retailer needs to integrate and enhance its forms supply chain processes to better align with its strategic direction of JIT supplies while reducing costs

Vendor Selection • Sent request for proposal to 5 vendors • Vendor must have proven advanced technical solutions • Must have business leaders who understand and are committed to providing leading edge solutions • Must have cost improvement execution for their customers • Weighted-factor Analysis on many criteria

RFP Results 145 Questions Later…. RFP Q&A Results Show: Score • Vendor 2 - Sigler 39.68 • Vendor 1 - Stone 39.68 • WF A, D, & P group 35.69 • FedEx Kinko’s 32.57 • In-House Annex 19.49 See Addendum 3 for Q&A • Pricing Matrix Results Show: • Sigler can provide the online ordering, billing, and inventory tracking that we desire • Sigler is very price competitive • Shipping costs at Sigler are the same as the Annex • Note: We implemented a UPS Shipping Station utilizing Wells Fargo’s discount at Sigler’s facility

Without Allocation Cost Of 2,500 Apps To Produce, Inventory, And Ship Within One Year

Collect Cost Data by Program 29% Cost Savings Using Vendor 2 Data Table:

Vendor Selection One Stop Online Orders, Printing, Storing, Fulfillment and Shipping Source Barcode Ready (Formscape compatible) UPS Ship Station – Able to use WF discount and save 33% on all of our shipping costs ($150,000 annually)

Cost Saving Results • Using our new preferred supplier as our one print source, we estimate cost savings of over $270,000 in 2008 and an increase in the service we provide our customers Savings of: $273,433

Results • Reduce order-to-delivery cycle time • Reduce overall costs of forms • Reduced cycle time for dealers to go “live” by 95% in Q1 2008 • Increase inventory turn times while maximizing print volume discounts • Allows us to track inventory at each dealer location whereby reducing opportunities for scrap • Reconcile invoices much quicker • Anticipate our customer needs an become pro-active in managing them

Questions

Lean Fulfillment in Financial Services