Using process analysis and simulation to evaluate the process capability of an order processing and fulfillment system

Abstract

In order to compete with online retailers that offer same-day shipping', Dell is looking to implement a Same Day Ship (SDS) program for their SmartSelection products (in-stock, build-to-stock products) in the US. Currently, Dell offers Next Business Day shipping (NBDS) for these products and wants to assess the capability of the existing processes to reliably execute the faster cycle times required for sameday shipping. Ship date commitments to customers are made based on specific order characteristics (such as payment type and in-stock availability) and on-time performance is evaluated based on whether these commitments were met. Historically, "on-time" was considered orders that were shipped on their estimated ship date or earlier and consequently processes and systems evolved around these goals. Current metrics indicate a significant opportunity to offer an earlier ship date to customers but a detailed process assessment was necessary to enable fact-based decision-making. This thesis examines the process capability of Dell's payment processing and order fulfillment processes in order to assess the risks and make informed decisions related to expanding a Same Day Ship (SDS) program. Research was conducted by observing current processes, analyzing historical data and participating on a Same Day Ship pilot launch. Simulation modeling was then used to evaluate and understand how changes to the individual processes would affect overall performance. Analysis of historical data shows high volatility in Dell's current processes, indicating that a full-scale Same Day Ship program would not be successful without process improvements. Results and observations from the Same Day Ship pilot, however reveal that under certain conditions, a same-day ship commitment can be met with over 95% reliability. The differences in these results can be attributed to process improvements that reduced variation as well as focused commitment on behalf of the pilot team. Finally, simulation and scenario modelling show that on the full volume of product offerings, improvements greater than 75% to the mean and standard deviation in both payment and fulfillment will be necessary in order to ensure a consistent same-day ship performance of over 95% without substantial prioritization. This framework can be extended to other areas of business in which cycle time is a key metric for process performance. Using a multi-dimensional approach to evaluate process capability can offer insights into highly variable systems that traditional process capability analysis will not allow.