My firm has a client that had been paying about $50,000 per month in postal costs for invoice processing. This company (which has annual revenues of more than $100 million) hired us to perform a technology review of their existing systems. During our review, we discovered a number of legacy operations, which provided us the opportunity to save the client dollars and earn our fees by upgrading those operations.
One of those operations was the invoicing process. By upgrading the output process of the invoice print routine, we were able to save this client considerable dollars and man-hours. Here’s how we did it.
The existing systems and processes
Our client runs Windows NT over a 200-user node with an AS/400 providing the main storage and application program server. The desktops run Windows NT Workstation and Windows 98 with the Microsoft Office suite. The client uses an appropriate proprietary application package.
The company receives telephone orders, whereupon the order-taker keys the order into an entry system. Ninety-nine percent of the orders are saved for end-of-day batch processing. The client produces about 8,000 invoices per day. At the end of the day, the client prints the invoices and manually folds and stuffs them.
We performed a careful analysis of this order-entry process, examining every detail to maximize the potential automation techniques.
The whole method was labor-intensive and inefficient. The invoice-batch consisted of not only customer orders, but also internal orders between departments. These internal invoices had no ZIP code, which meant the blank field was moved to the head of the file, and therefore, came off the printer first. Thus, the operator would pull the internal invoices off first and then place those to be delivered first.
The operator would then take the next set of invoices and move them to a separate table to be manually folded and stuffed for mailing. Then the operation personnel would take these stuffed invoices, run them through a postage meter, and then hold them for mail pickup that day.
The client was mailing the invoices every day at the full rate of 33 cents per piece (about $2,600 per day). Also, the manual folding process was taking two employees about two to three hours to perform. Because our firm does not usually figure the cost of personnel on a project this small, the objective here became reducing the time spent performing the manual folding and stuffing, freeing up these employees for other functions.
From what we observed, we determined that our other objective would be to maximize the client’s postal discount from the U.S. Postal Service. But in order to obtain the maximum discount, we would have to put the mail pieces in carrier order and use post-net bar coding.
The client uses an HP-8001 printer to print all invoices. By checking with Hewlett-Packard, we discovered that their printers require a RAM-chip upgrade in order to print post-net bar codes. We installed the chip with no problem and had the printer up and ready.
The next step was a little bit more involved. The client’s invoice print program is written in AS/400 RPG. Because of this, we had to change the code so that when the program was ready to print the mailing address, it would look up the bar code on a table in the Hewlett-Packard RAM chip, return this bar code, and print.
Next, we installed Pitney Bowes’ SmartMailer system, which validates the address while printing the invoice and also prints the tray number on the invoice. The tray number refers to the particular stacking tray in which invoices are placed to maximize the discount on the mailing. That number appears on each mail piece, and the bar code appears on the invoice. This marking system ensures that the mail is in carrier sort order, which earns our client a discount of 11 cents per mail piece.
Then we tackled the internal-invoice problem. We routed the internal invoices to an e-mail account so that they would be automatically delivered without ever being touched. This saved an hour of processing time.
To further automate the mailing system, we calibrated the SmartMailer system to fold the invoices by reading the OMB mark (a constant code) on the invoice. The OMB let the machine know when the last page of an invoice had been reached, so it could then start the next invoice. (The OMB functioned as a sort of “continued on next page” directional.) This cut another two hours off the process.
When we began this overhaul, the cost for each mail piece was 33 cents each for 8,000 invoices, which amounted to about $2,600 per day. By installing the new system, we reduced the cost per piece to 23 cents ($1,800 per day), for a savings of $800 per day or about $16,000 per month. The new system also cut the mail-processing time by three hours for two people, enabling the client to lend these previously underutilized employees’ time to a greater sales effort.
Our client’s legacy operations were slowing them down and wasting a good deal of money. By upgrading the mailing system, we saved the company man-hours—which increased productivity—and we added considerable dollars to their bottom line.
L. Pepper Morton is the director of management information systems at Consumer Credit Counseling Service. Morton has over 25 years of executive experience in the IT field.
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