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Product Shipment Delays Reduced; Process Improvements Under Way
SUMMARY:
Intuit addresses shipment delays of direct-order products and implements immediate and long-term procedures needed to build a reliable manufacturing and fulfillment process. Key learning - software downloads are a big hit with customers.

One of Intuit’s manufacturing and distribution partners recently experienced fulfillment issues, which caused shipment delays for customers who ordered products directly from Intuit in November, December and January. Simultaneously, some of these customers had difficulty accessing order-status information either online or directly from Intuit due to incompatibility issues between Intuit and the distributor. 

Complexity and frequent changes in the supply chain process contributed to the backlog, which is now virtually eliminated, except for approximately 1,200 orders that are receiving special attention. While the problem only affected a small percentage of the total Intuit customer base, each delayed order caused customer dissatisfaction. Approximately one percent of direct orders were delayed, and direct orders constitute approximately 30 percent of Intuit product sales.

In addition to reducing the backlog, teams have initiated and completed several process excellence projects to improve performance of the direct order fulfillment process. These have improved the accuracy of the shipping confirmation process and decreased the time needed to process returns. “These are the first of many actions being taken by our team members to prevent future backlogs and create a smooth distribution process,” said Bill Hensler, acting leader of Intuit’s supply chain organization.

Shipping Guarantees

Intuit will now be able to ship products by standard mail two business days after the customers’ order submissions, which will ensure delivery times between seven and ten business days. Expedited orders received by 10 a.m. PST will be shipped on the same day they are requested. This will allow enough time for the system to process orders and ensure Intuit’s order commitments are met.

Impressive Efforts

 Chief executive Steve Bennett commended Intuit’s call center employees for efficiently handling higher-than-normal call volumes from affected customers. “Our customer-facing employees dealt with this difficult situation as absolute professionals and did all they could to respond to customer questions and concerns,” he said. “Thank you to everyone who has worked on this service delivery issue, both to resolve it and to minimize the impact on our customers.” 

Alan Madison, vice president of service and technical support, said the representatives’ strong performance was a testament to their commitment to do right by Intuit’s customers. “I’m so impressed with the caring attitude the team demonstrated throughout this situation,” he said. “They were courageous in voicing their concerns for our customers, and they came to the table with some great ideas for recovery. I just want to say thanks.”

Lessons Learned

The backlog affected a relatively small number of Intuit customers, but left them extremely dissatisfied. As a result, executives involved in product manufacturing and fulfillment realized the need to install procedures ensuring inventory accuracy and real-time order information. 

“We are addressing the root causes, in order to correct the situation and ensure that it never happens again,” said Hensler. ”Shipping product on time and meeting customer expectations is something we must deliver.”

The issue also taught Intuit an important lesson: Software downloads are a quick way to provide product to waiting customers. Download offers for QuickBooks were met with general customer enthusiasm and the company is considering making downloads a larger part of the distribution process in the future.

Hensler said the various teams involved did an impressive job rallying to resolve the situation for customers. “The good news today is that customer orders are now being shipped within two business days,” he said. “The focus now is on preventing future problems.”

Evaluating Problems and Causes

Many issues contributed to the problem, including the fulfillment partner’s low estimates of the components needed for production, inaccurate inventory levels, idle manufacturing time and missed shipments. But Intuit also bears responsibility in the areas of project integration and execution, said Dennis Adsit, senior vice president of operations and process excellence.

“A big part of our culpability was in not evaluating the first team of people our partner had put on our account,” he said. “The team leader did not have a strong direct channel background. Also, one of the team members was commuting from California as opposed to being at the factory full-time to talk with the people involved and understand all the related issues.

“We also could have become more involved earlier, when delivery issues began to occur,” said Adsit.

Intuit executives acknowledge that the manufacturing and fulfillment process must be simplified, and the number of product stockkeeping units needs to be reduced. The supply chain team has scheduled a product profitability summit with the business units to address the complexity issues.  Also, the process excellence team is currently working with the distribution partner to improve the manufacturing and fulfillment process. Plans include a new process to expedite completion of individual orders, and the increase of automation for shipping confirmations. “When these projects are completed, we’ll have a stronger, more reliable process that can fill direct orders for all of Intuit’s software products,” said Adsit.

Product distribution to retailers was not affected. Intuit received an award from the national retailer Staples this month for excellence in Supply Chain Management in the U.S. Staples’ vice president of supply chain management nominated Intuit, the only software vendor to win an award this year, on improvements made and results delivered in 2003.

Making Amends

Intuit took a variety of actions to improve the customer experience, ranging from providing free products and services to software downloads for those who needed the product quickly.

The consumer tax group, for example, sent TurboTax products via overnight delivery at no charge to customers who had originally paid for expedited shipments and did not receive them. The Quicken team offered free downloads of online photo organizers and business and sales letter templates.

The QuickBooks group sent $25 American Express gift certificates and shipping refunds to many affected customers. To minimize delays, the QuickBooks team initiated offers to download the products customers needed onto their computers, which boosted satisfaction levels. “The downloads for QuickBooks really helped,” said Steven Aldrich, general manager of QuickBooks segment solutions.

To assist customers and call center representatives, a real-time ‘order status’ Web link was recently launched, giving call centers more access to direct order status and more visibility into customer orders. The order status tool also provides business units with weekly order updates.

Breakdown of the Backlog
Intuit originally handled the fulfillment process internally but as customer orders expanded, executives realized the procedures were not scalable for the growth. After an initial due diligence and canvassing of the marketplace, Intuit selected a direct manufacturing and fulfillment partner in June 2003. To become familiar with business procedures, the supplier worked in Intuit’s San Diego offices to observe and document the company’s products and sales volume and supported the Quicken launch in August.

In November, more than 400,000 orders from both Intuit and its customers were received following the launch of QuickBooks and the production start of TurboTax. A short time later, production problems surfaced, creating shipping delays for all software versions and flavors ordered by customers directly from Intuit. Members of the production team went to the factory to understand their issues and improve the process.

Wesley Jess, director of the direct supply chain, spent six weeks there to oversee production. “We have worked day and night to correct this problem,” he said. “We have our arms around it now and Intuit is current with almost all orders.”

Process Excellence Efforts

In response to the backlog, the process excellence team has completed the following projects:

  • Improvements in the accuracy of the ship confirmation process.
  • A new process to identify “non-conforming” material within the supply chain.
  • A decrease in the time needed to process returns, now done within ten business days.

Process excellence will have these projects completed within the next few weeks:

  • Reduction of complexity and improvement in accuracy of the “artwork” process used for product packaging and shipping.
  • A streamline of the process for ordering items for use within Intuit.

Intuit is also working with the direct manufacturing and fulfillment partner on several long-term improvements:

  • A financial settlement for Intuit-owned inventory.
  • Revision of the factory’s floor layout to reduce shipping defects.
  • A new process to expedite completion of individual orders.
  • An increase in the use of automation for shipping confirmation.
Contact the author: Vanessa Richardson
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