1. Lean Six Sigma Initiative Manual Invoice Processing

2. 2 © 2007 BroadSource, Inc. DEFINITIONS Lean Eliminate non-value-add activities Eliminate waste Just in Time (JIT) delivery; customer pull Lean can be used to: –Eliminate excess inventory –Reduce waiting time or delay –Create continuous flow Six Sigma Improve quality Reduce defects “Voice of the customer” – meeting customer requirements “Voice of the data” – data driven problem solving Six Sigma can be used to: –Reduce number of defects per opportunity –Reduce variation in a process

3. 3 © 2007 BroadSource, Inc. DMAIC METHODOLOGY D efine –state the problem in a measurable way –identify the key output (Y) M easure –collect data to understand current process –identify possible inputs (X’s) to the Y A nalyze –document the process –narrow down the inputs (X’s) I mprove –identify possible solutions –assess risks –pilot and implement C ontrol –document lessons learned –implement ongoing measurement –quantify improvement

4. 4 © 2007 BroadSource, Inc. INITIATIVE OVERVIEW Lean Eliminate business non-value-add activities Eliminate waste Create continuous flow Use Customer A as a pilot Six Sigma Improve process once GSG has completed several iterations of data entry Reduce variation Reduce number of defects Roll out to all customers Then…

5. 5 © 2007 BroadSource, Inc. DEFINE Problem Statement Problem Statement - Account Managers spent 26% of their time from 12/19/2005 to 10/26/2006 processing manual invoices which takes time away from finding savings opportunities for customers. Goal Statement –Account Managers will spend no more than 5% of their time processing manual invoices by 6/30/07 Voice of the Customer –Decreasing Account Management time on non-value add or business non-value add tasks and increasing time on value-add tasks will increase customer satisfaction. Potential Financial Benefit –Increase revenue –Reduce costs –Ability to scale Operations

6. 6 © 2007 BroadSource, Inc. Acct Mgr External Customer Check issuer (e.g. Next Process) Data entry resource trained on process and OneSource View Invoice page resembles manual invoice Customer specific reqts. for AP report content Frequency of batching OneSource allows preview of AP report Manual Invoice modeled in OneSource AP report Process Manual Invoices Invoice is defect free and accurate (availability of document) Inventory creation Account management (associations/new account) Charge Management Allocations Resources to handle volume Data entry resource trained on process and OneSource Paper Invoice or file within Email/Web page Data entry of manual invoice Customer input (phone calls, MACDs, etc.) Batch invoices into AP record Scanner hardware Carrier Data entry resource External customer Acct Mgr StakeholdersRequirements Process Deliverables High Level Process DescriptionRequirements Resources Required Providers of the Resource CustomersOutputsProcessInputsSuppliers DEFINE SIPOC Diagram Preparation of manual invoices Data entry into OneSource Review for accuracy and completeness File manual invoice AP report

7. 7 © 2007 BroadSource, Inc. Task Value add?Hours Implementation BNVA2151.67 Invoice Processing-Manual BNVA1753.41 Account ManagementVA1080.23 Other Internal Activities BNVA346.17 Customer Service VA322.83 Dispute Management VA260.50 Invoice Processing-Electronic BNVA258.83 Opening-Sorting Mail BNVA227.25 Data Updates and Support VA214.08 Ongoing New Bill/Inventory Setup VA106.58 Optimization (Post Audit) VA56.50 Billing BNVA51.42 Audit VA23.83 Order Management VA8.00 Documentation BNVA2.00 MEASURE Historical Work Tracker Data Date range – 12/19/05 to 10/26/06 = related to manual invoice processing = directly impacts revenue VA – value-add BNVA – business non-value add NVA – non value-add

8. 8 © 2007 BroadSource, Inc. MEASURE Account Managers were spending - 26% of their time on “manual invoice processing” 5% of their time on tasks that directly impact revenue

9. 9 © 2007 BroadSource, Inc. MEASURE Good candidate for pilot

10. 10 © 2007 BroadSource, Inc. MEASURE How reliable is Work Tracker data? Confusion on using “Invoice Processing – Manual” or “Account Management” for time spent on AP report creation. Operations “re-worked” Work Tracker tasks and re-trained each Account Manager on entering his/her time. Old TasksNew Tasks Account Management Account Management (includes hours from old Order Management) Audit Billing Customer Service Data Updates and Support Post Implementation Bill/Inventory Updates (includes hours from Ongoing New Bill/Inventory Setup) Dispute Management(obsolete) Documentation Implementation Invoice Processing-Electronic Invoice Processing-Manual Ongoing New Bill/Inventory Setup(obsolete) Opening-Sorting Mail Optimization (Post Audit) Optimization and Disputes for Savings (includes hours from Dispute Management) Order Management(obsolete) Other Internal Activities = related to manual invoice processing

11. 11 © 2007 BroadSource, Inc. ANALYZE Final Value Add Analysis = related to manual invoice processing = directly impacts revenue Old TasksNew Tasks Value add?Hours Implementation BNVA2198.17 Invoice Processing-Manual BNVA1807.58 Account Management (includes hours from old Order Management)VA1122.57 Other Internal Activities BNVA360.00 Customer Service VA346.58 Optimization (Post Audit) Optimization and Disputes for Savings (includes hours from Dispute Management)VA341.33 Data Updates and Support Post Implementation Bill/Inventory Updates (includes hours from Ongoing New Bill/Inventory Setup)VA334.75 Invoice Processing-Electronic BNVA261.33 Opening-Sorting Mail BNVA227.25 Billing BNVA66.50 Audit VA23.83 Documentation BNVA2.00 Dispute Management(obsolete) Ongoing New Bill/Inventory Setup(obsolete) Order Management(obsolete) Date range – 12/19/05 to 10/26/06 VA – value-add BNVA – business non-value add NVA – non value-add

12. 12 © 2007 BroadSource, Inc. ANALYZE Detailed Process Map (from SIPOC diagram) Preparation of manual invoices AP report File manual invoice Data entry into OneSource Review for accuracy and completeness Add invoices to AP record Review Manage Audits page for unassociated accounts and unallocated cost centers Query for pending invoices Create AP recordGenerate AP report (daily) Invoices filed Open mail Stamp invoice with receipt date Organize invoices by carrier and due date Create bill in OneSource Add invoice Add new accounts (if applicable) Add / Edit associations (if applicable) Add / Edit charges (if applicable) Review View Invoice page in OneSource Add / Edit inventory (if applicable) Repeat for each invoice

13. 13 © 2007 BroadSource, Inc. ANALYZE Detailed Process Map (from SIPOC diagram) Preparation of manual invoices AP report File manual invoice Data entry into OneSource Review for accuracy and completeness Add invoices to AP record Review Manage Audits page for unassociated accounts and unallocated cost centers Query for pending invoices Create AP recordGenerate AP report (daily) Invoices filed Open mail Stamp invoice with receipt date Organize invoices by carrier and due date Create bill in OneSource Add invoice Add new accounts (if applicable) Add / Edit associations (if applicable) Add / Edit charges (if applicable) Review View Invoice page in OneSource Add / Edit inventory (if applicable) Outsourced steps

14. 14 © 2007 BroadSource, Inc. IMPROVE New Customer A “Pilot” Process Map BSI scans Customer A invoices BSI FTP’s pdf files to GSG and emails notice (by 5 pm EST) GSG creates invoice log GSG enters manual invoices (by 8 am EST) GSG Quality Control resource checks invoices on invoice log GSG updates status and bill notes on invoice log GSG Quality Control updates status and bill notes on invoice log BSI reviews issues on invoice log and corrects problems GSG email invoice log to BSI by 8 am EST Preparation of manual invoices BSI opens mail BSI stamps invoice with receipt date BSI organizes invoices by carrier and due date Data entry into OneSource Review for accuracy and completeness AP report File manual invoice BSI adds invoices to AP record BSI reviews Manage Audits page for unassociated accounts and unallocated cost centers BSI queries for pending invoices BSI creates AP record BSI generates AP report (daily) BSI files invoices

15. 15 © 2007 BroadSource, Inc. IMPROVE FMEA exercise Failure Mode and Effect Analysis – brainstormed what could go wrong (defects) before Customer A pilot started and possible solutions to mitigate the risks Process Step / Input Potential Failure Mode Potential Failure Effects SEVSEV Potential Causes OCCOCC Current Controls DETDET RPNRPN ActionResp Actions Taken / Timing SEVSEV OCCOCC DETDET RPNRPN BSI sends invoices to GSG by 5 pm our time GSG does not receive all of the invoices (or incomplete invoices) invoice not entered into OneSource; invoice gets paid late; BSI rework 7 Elaina fails to transmit all of the invoices 2none10140 Missing Invoices Report (brand new bills 'may' slip through the cracks) Elaina will notify GSG of her invoice count - then GSG will reconcile Elaina Jen to train Elaina week of 11/13/06 7117

16. 16 © 2007 BroadSource, Inc. IMPROVE GSG started processing manual invoices in Nov 06.

17. 17 © 2007 BroadSource, Inc. CONTROL Lessons Learned Regular communication needed between GSG and BSI OneSource enhancements needed –“QC Complete” invoice status –invoice “requires attention” flag Need another Work Tracker bucket for “GSG Review”

18. 18 © 2007 BroadSource, Inc. CONTROL Control Plan Date "Manual Invoice Processing" HrsTotal HrsMonthly % Sample Mean (%) Sample Std Deviation (%) Lower Control Limit (%) Upper Control Limit (%) 6/15/2007141608.75%6.78%2.93%0.00%15.58% 7/1/2007131598.18%6.78%2.93%0.00%15.58% 7/15/20071715710.83%6.78%2.93%0.00%15.58% 8/1/2007141578.92%6.78%2.93%0.00%15.58% 8/15/2007121597.55%6.78%2.93%0.00%15.58% …….

19. 19 © 2007 BroadSource, Inc. CONTROL Financial Benefit DataSource BSI Account Manager average hourly rate = $XDirector of Operations GSG resource average hourly rate = $YDirector of Operations BSI average time per invoice = 5 min / invoiceWork Tracker GSG average time per invoice = 8 min / invoiceTimesheets provided by GSG during pilot phase Average number of manual invoices for Customer A per month = 1400 OneSource Production database query Assumptions: The average number of invoice for Customer A per month will not fluctuate greatly BSI could not reduce its “time per invoice” metric without outsourcing the work Known data: Savings: $22,196.96 per year for Customer A

20. 20 © 2007 BroadSource, Inc. DEFINE Problem Statement Problem Statement –GSG throughput rate for manual invoice processing for the Customer A pilot of 7.5 invoices per hour (8 minutes per invoice) is too low. BSI is fearful that some invoices will not be entered into OneSource in a timely fashion. This could delay the Account Managers creating customer’s AP reports which would result in late payment of invoices. Goal Statement – –GSG will achieve a throughput rate of 12 invoices per hour by 9/30/2007 for all customers Voice of the Customer –External customers require timely AP reports. GSG processing more invoices per day would reduce risk of not having invoices in OneSource that need to be tied to an AP report Potential Financial Benefit –A higher throughput rate would decrease BSI’s costs and increase the total financial benefit from outsourcing manual invoice processing