Activity-Based Management at Stream International Harvard Case Solution & Analysis

Activity-Based Management at Stream International Case Study Solution

Evaluation of Five Process Improvement Projects

First Project:

The first proposal for process improvement is related to the quick response to the customer’s information requests, which helps to reduce the ad hoc reporting which ultimately leads to the efficiency in response to the customer’s information requests. This project also demands for the clarifications of the roles and responsibilities of the employees along with the identification of the potential needs and wants of the customers, which will be helpful in effective decision making. The annual return from this process would be 206 thousand dollars, while the annual return per FTE would be 7,893 dollars, and the return per head count would be 920 dollars.

This higher customer satisfaction might lead to the increase in revenues ultimately profits for Stream International. It will also increase the customer loyalty,which will improve the customer’s retention rate. The best advertisement to increase the reputation of the company is the word of mouth advertisement, which would increase the stock prices of the company due to an increase in the return of assets.

Second Project:

The second proposal for process improvement is related to the improvement of quality control systems of Stream International by collecting the data provided by the customers to improve the process. It might also be used to improve the association with ISO. While comparing the things from its past, qualitative information might be the better anticipation, but the company should remember one thing that it was not analyzed at all. The costs associated with second project is related to the training of all employees for performing the assigned documented task in better and efficient way to maintain the quality during process. The expected annual return from this process would be 251,576 dollars, while the annual return per FTE would be 10,202 dollars, and the return per head count would be 1,328 dollars.

This improvement might lead to the efficiency in the utilization of assembled information, which will be helpful to make effective decisions for the purpose of maximizing the wealth of the existing shareholders, which will provide an assistance to capture the potential investors.

Third Project:

The third proposal for the process improvement is related to the reduction of moving and storing the cost of inventory, which might occurs due to the shifting of inventory from one place to another. This process improvement brings the new ways to store and move the inventory by reducing the non-value added costs form the process, which will lead to the decrease in the inventory costs as well as an increase in annual savings of 808,291 dollars with the expected rate of return of 33 percent. Furthermore, the annual return per FTE would be 34,469 dollars, and the return per head count would be 5,181 dollars.

The shortcomings form this process leads to the decrease in closing inventory costs as well as the costs of work in progress goods and inventories by reducing the costs of rent, utilities, insurances and taxes. The strength of this process would be an increase in the return on assets along with an increase in the customer satisfaction level due to the lower prices, which will ultimately lead to an increase in the shareholder’s wealth due to the growth in share prices.

Fourth Project:

The fourth proposal for process improvement is related to the streamline process of billing, which is used to reduce the costs of those activities that are not adding value in production process. The costs saved form this process will lead to the efficiency in production process that would allow to earn 5.3 million dollars per FTE.

Fifth Project:

The fifth proposal for process improvement is related to the streamlined activities of human resources, which includes the responsibility to define the roles and supervisory position to all the employees. This process might lead to the efficient and effective decision making, which helps to increase the response time to the complaints received form the customers.

Conclusion

After analyzing all the proposals, it has been recommended to choose the proposal for process improvement related to the reduction of moving and storing cost of inventory, which might occur due to the shifting of inventory from one place to another, because this option has given the highest savings along with the highest return on FTE and highest per head count.

Exhibit 1: Calculations for Proposal 1

ActivityFTEsHead CountFragmentationSix-month ABM costsAnnual CostsTarget Savings
Respond to customer requests8.26612%                               118,000             236,000           59,000
Manage Customer complaints4.9579%                                 73,000             146,000           36,500
Track / Expedite jobs8.56713%                               135,000             270,000           67,500
Maintain job files4.53486%                                 86,000             172,000           43,000
Total26.1224                                412,000              824,000          206,000
Return on ABM Cost                                                                                                                                                            206,000
Annual Return per FTE                                                                                                                                                                7,893
Return per Head Count                                                                                                                                                                   920

Exhibit 2: Calculations for Proposal 2

ActivityFTEsHead CountAnnual CostsTarget Savings
Pull Samples                      1              12             43,462             13,039
Inspect Samples                      4              16           155,735             46,721
Ensure Process Capabilities                      2              20             70,307             21,092
Ensure ISO 9000 Compliance                      7              48           194,738             58,421
Ensure Compliance (other)                      3              32             59,711             17,913
Benchmark performance                      0                6             23,410               7,023
Make Process Improvements                      7              56           291,223             87,367
Total                    25            190           838,586           251,576
Return on ABM Cost                                                                                      251,576
Return per FTE                                                                                   10,201.78
Return per Head Count                                                                                     1,327.58

 Exhibit 3: Calculations for Proposal 3

Total Annualized Expense      2,474,466
FTE                  23
Head Count                156
Annual Savings         808,291
Return %33%
Return per FTE           34,469
Return per Head Count             5,181

 

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