Inaccurate Cycle Billing Records in OMD - Northeast

Black Belt: Jim Palmer Division: Operations/NortheastBU – Steering Comm Presentation

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Agenda

Original Project Charter & Final Updated Benefits & Sigma calculations

The Project Story – Finding the Right Path

The Critical X’s we can’t directly effect - at the Start of the process Document completion by Sales Reps Order Coordinator document review There are other projects working on Sales Documentation

The Critical X’s we can – A Safety Net at the End of the process The Root Cause we can effect – Data entry errors Where we found the Project’s Savings Where we implemented the Improvement

The “Best” End State process

2nd Project Leveragability Expanding Fields Tested and Territory covered –

All OMD Contracts; B&W Overage Rates by Segment, other data validation Document Imaging Solutions – The Florida Solution

Sample Report

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Original Project Charter

PROBLEM STATEMENT: Inaccuracies in the Northeast Region Cycle Billing records result in lost revenue and impact IKON’s ability to forecast future revenue. These inaccuracies could include over-billing and under-billing of customers.

PROJECT OBJECTIVE: Correct the Base and Overage rates and other product coding in the Cycle billing records and insure the use of coding that is appropriate for equipment type and segment.

PROJECT BENEFITS: Based on a prior review completed in the Connecticut marketplace there is a 2% to 5% error rate in existing billings. The Northeast Region has approximately $200mm in Aftermarket revenue. 70%, $140mm, is billed to the customer by IOSC. The remaining $60mm is billed directly by the Region. A 1% positive improvement in billing rates could result in $2 million in increased revenue.

PROJECT METRIC “Y”: Accurate pricing and coding leading to increased revenue and improved customer service.

ORIGINAL DEFECT DEFINITION: Inaccurate pricing and coding in cycle records.

New Defect Definition: Any Color record with an Overage Rate below $0.06 per copy

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Documents Reviewed & OI Benefits Obtained

Agenda

Northeast Mid Atlantic Florida Total

Total Items Reviewed 98 33 60 191

Missing Documents 30 8 10 48No Color Pricing on documents 19 2 2 23

Low Color Rate is approved 4 0 1 5

No Potential for Generating Benefit 53 10 13 7654% 30% 22% 40%

Insufficient Click volume to calulate benefit 19 19Actual Usage below Contract Min 19 3 3 25

Corrections Made but No OI Benefit 19 3 22 4419% 9% 37% 23%

Corrections with OI Benefit 26 20 25 7127% 61% 42% 37%

Total Potential OI Benefit 282,327$ 148,289$ N/A 430,616$

Project OI Benefit from Corrected Items 113,665$ 93,464$ 51,345$ 258,474$

This benefit calculation is based on Historical Average Monthly Click volumes multiplied by the change in Overage Rate Pricing that resulted from our corrections then projected for a 12 month period.

The Florida Potential Benefit amount was not calculated due to lack of Copy Volumes on numerous items.

The Fla Total Serial number count of all Color contracts was not compiled. The first file used was the Defect Only file

The "Total Potential" benefit was the hypothetical benefit assuming (1) we were able to find copies of all necessary Sales Documents and (2) all documents carried IKON's Aftermarket Price Book Recommended pricing.

The Contracts Changed amount is lower than Potential as a result of (1) copies of actual Contracts not found, (2) no Correct Color pricing found on documents or (3) actual click volume below contract minimum.

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Sigma CalculationsBefore and After

• Total Items: Total count of serial numbers of Color equipment in original files.•“Individual” and “Group Individual” items only• Install dates from Jan 1 2002 thru Nov 2003

• Defects: items with Color Overage Rates below $0.06 per page.•131 original Defects; 68 Defects corrected; 63 Defects remaining

Original List of Equipment Total Items Defects DPMO Z Score ST Sigma

Northeast District 1672 98 58,612 1.5811 3.0811Mid Atlantic 928 33 35,560 1.8127 3.3127

2600 131 94,173 1.6533 3.1533

After Review & Correction Total Items Defects DPMO Z Score ST Sigma

Northeast District 1672 53 31,699 1.8634 3.3634Mid Atlantic 928 10 10,776 2.3002 3.8002

2600 63 42,474 1.9784 3.4784

Sigma Level Calculations

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The Project Story: Finding the “Right” path

Phase 1: Original Scope - Boiling the Ocean Too many fields in database to test in 4 to 6 months 170,000+ MIF in NE with multiple data fields

Phase 2 – Narrow scope to Color Overage Pricing – where the money is Compare the OMD price to Aftermarket Price Book Could show how much discounting is happening but No way to Confirm the price in OMD is “Right or Wrong”

Phase 3 – Look to Commissions group for the “Right Price” Researched the full Document Life Cycle from Sales to Invoicing Commissions is the only group with mandated “Price Policing” authority But they don’t “Test” every price – few Major Accts & No CPC testing ability

Phase 4 – Tightest focus Compare pricing in OMD to the Original Sales Documents The only way to prove The Price is Right

APB Chi

APC Tool

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X’s and Critical X’s Both In and Out of Scope

N

S

EW

"Accurate"CustomerInvoices

SalesSales & Service

Mgmt

Cycle Billing Reps Cycle Billing Mgmt

CommissionReps

Documents

overly enthusiastic discounting

Mktplace Sales Mgmtcontrol over discounting

Poor CBR Training

Inaccuratepricing

Inaccurateproduct coding

Mktplace choice inenforcing pricing

Inaccurate dataentry

Thursday, May 13, 2004

Inaccurate Cycle Billing Coding - Northeast OMD

Inaccurate interpretationof contract details

Unclear written details notes

Overly complicatedcontract documents

Competing with something other than “Price”

Regional Mgmt reportingof Service price discounting

“Correct” policies for penalizing discounting

Timely Service Mgmt review of price discounting

Inadequate Sales Training

Receipt of Contract with ALL pricing info

Accurate review of pricing versusNat’l Price Book

Knowledge of discounting penalty policies

Training of new CBR’s

Short term controls over new CBR’s

Ongoing testing of data accuracy

Competing for major Acct Wins

Ongoing testing of data accuracy

Short term controls over new Comm Reps’s

Training of newCommission Rep’s

Commissions Mgmt

Poor Comm Rep Training

Inaccurate data entry

Inaccurate interpretationof contract details

Consistent application ofdiscounting penalty policies

Critical X’s In ScopeCritical X’s Not In Scope

Details on key points are on next 3 slides.

28 potential “X’s”; 7 Critical “X’s”; 4 In Scope & 3 Out

of Scope.

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X’s and Critical X’s Where we looked for the problem

Sales - The source of the documents Inconsistent completion of Service Contract document led to

investigation of existence of any Policy on this topic – None found. Also led to discussions with IKON Univ re Sales Rep training on How

To Complete Documents – There was none. Discussed with IKON Univ the potential to include this topic in future

training.

Sales Mgmt – The 1st line of review of Sales Documents Compared the Color Ovg price in OMD to Aftermarket Price Book Could show how much discounting is happening but No way to Confirm the price in OMD is “Right or Wrong”

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X’s and Critical X’s Where we looked for the problem

Commissions – the only group with mandated “Price Policing” authority Commissions uses exactly the same documents as Cycle Billing. Tried to base a solution on assumption that Commissions had

significantly better data entry/interpretation accuracy. Tested the Commissions reps on Color Overage data entry error rate Found they were only slightly better than Cycle Billing reps. There was no existing “Data Accuracy Testing” process Commissions was moving to Macon and so did our discussion Macon Commissions had no plans to implement any data accuracy

testingAPB Chi

APC Tool

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X’s and Critical X’s Where we looked for the problem

Documents - There is no policy defining specific Service documents where pricing must be

written. Sales reps often put hand written notes on documents covering color overage

rates. Documents are “one size fits all” and present difficulties with dual meter

combination color & B&W machines with 2 overage rates.

Cycle Billing Reps – No mandated Price policing policy Numerous data entry errors Too often CBR’s must rely on “interpretation” of written notes and comments

to determine the color overage pricing.

Cycle Billing Mgmt – There is some data validity testing being completed but There was no testing done to validate B&W or Color Overage Rates

APB Chi

APC Tool

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A Map of the Life of Sales Documents

Proposed Document Process Flow in NE Region - Add New Overage Exception Report to Cycle Billing

Co

ntr

acts

Pro

cess

or

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issi

on

sg

rou

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om

mis

sio

ns

gro

up

Bill

ing

Dep

artm

ent

Ord

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oo

rdin

ato

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ales

Rep

No Discount Form in Package

OC makes 2 copies ofDocuments:

- Originals are sent to Billing- 1 copy is sent to Cycle Billing

- 1 copy for OC files

Billing Dept sendsEquipment invoice

to Customer

Documents aresent to BillingCoordinators

Contracts groupenters Maintenance

data into OMD

Contracts discounted offNat'l Price Book require

Sales Mgr and Director ofService approval

Documents recvdback from

Commissions: Anycharges to Rep

Comm are processed.

Determine whetherService Contract is priced

with a discount

Obtain Discountingapprovals

If Service is discountedconfirm receipt of SignedException Approval Form

Billing Coordinatorsends equipmentinfo to IOSC for

leasing approvals

Calculate and ApproveCommission Amount

Basic Equipment dealinfo is pulled in from

data entered by OrderCoordinators and

Billing Dept into OMD

After documentreview, deal is

approved

Commissionspeople review

each transaction

Order Processorreviews

documents forCompleteness and

Accuracy

Receive Formfrom Sales

Rep

Sales Documentssent to OrderCoordinator

Contracts discountedup to 10% off Nat'l PriceBook require Sales Mgr

Approval

Billing Dept entersrest of DealEquipment

information intoOMD

Coordinator sendsDocument Package toCommissions group:

Commissions is a partof Billing Dept

Sales Rep obtainscustomer

signature onMaintenance

Contract

Determine equipmentcommission based on

Rev & GP

If No ApprovedForm - call SalesRep to get form

or noCommission will

be paid

Deliver ServiceException form

Doc Package containsApproved Exception form

After Approval,communication is

sent to SupplyChain to start

delivery process

Sales docsreceived by Order

Processor

Order Processorenters Equipmentinfo into OMD to“Stage” the deal

Send“Approved”documents

back to BillingGroup for

Processing

New processsteps shownin dark blue

OC Turnaroundtime is usually

24 to 48 Hrs

SDC Delvy timing -Core Prods 72 Hrs.Non-Core - up to 10

Days

Audit Team will receiveand review a copy of the

weekly Color OverageException report

Audit Team disperseException report tospecific Mktplace

Customer Billing Reps

CBR’s will revieworiginal docs and

correct any inaccurateoverage pricing.

CBR’s deliverException Report

responses to AuditTeam

Audit TeammaintainsException

Response recordsfor Mgmt review

We are putting a control at the back end of the process

The “Best” place for a Control is at the Front End of

the process

“We are waiting too long in the Document Processing Cycle before we do any detailed Service Pricing review.”

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The Best End State Process

The Sales team gets specific training about how to complete Service Contract documents. What pricing details to include and where to write it Specific direction that this is “Required” not “recommended”

The Order Coordinators strictly review these documents Use the Aftermarket Price Comparison tool to confirm pricing

Enforce Sales / Service Manager Discount Approval policy

Kick back any documents that don’t follow the policy

Agenda

APC Tool

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Our Simple Solution

Run a Color Overage Rate Exception:

Every Sunday looking back 14 days

Focusing on every contract that has been updated during the most recent 14 days: This will give the report a self-auditing function..

The report will look at New Contract setup, renewals and any other updates:

This will find any newly created problems BEFORE they reach a customer Find the errors while the source Sales Docs are still on the Billing Rep’s desk.

The report is now running for ALL OMD Contract groups in IKON

Agenda

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Chi Square test on Final Errors Found

Return

Alpha 0.05 119

Observed Expected Chi-Square

Boston North 1 15 14.1 0.05SENE 2 10 12.1 0.37

Capital 3 14 17.4 0.67Conn 4 27 19.2 3.15

Metro NY 5 16 13.9 0.33Penn 6 12 15.3 0.73

Upstate NY 7 18 12.8 2.13Va 8 7 14.1 3.59

119 119 11.03 Total Chi-Square7 d.f

0.137 P-valueDo Not Reject Ho

Ho = There is no correlation between Marketplace and number of errors found

Chi-square Test for Total Data Entry Errors

Chi-Square Goodness of Fit Test for All Transactions in Final Northeast Corrections

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End of Presentation

All following slides are for reference purposes only