California Franchise Tax Board

1
California Franchise Tax Board

• Progress Report 3/30/1999
• Anang Umaedi
• Hugues Meyrath
• Jinbaek Kim
• Jody Goodall

2
Background

• The California Franchise Tax Board is the
  department that collects
• state personal income taxes
• bank and corporation taxes
• Nature of organization
• State Government Agency
• Restricted by regulations and requirements
• Procurement for fiscal year 1997-1998
• 5062 requests
• 23 Million total requisition value

3
Background (Contd)

• Small Purchases (under 1,000)
• 72 in number (3,658 request)
• 4 of the total requisition value (858K)
• Half of the annual workload of the purchasing
  unit.
• Average of 1.76 hours to process a request
• Measured average cost 47.06 per order (with
  average wage rate of 26.68 per hour)

4
The Scope of the Project

• FTB small purchase activities (under 1,000)
• analysis of the current process, its cycle time,
  cost, and other effectiveness measures
• identification of the re-engineering
  opportunities
• the impact of e-commerce on key benchmarks (cost,
  cycle time, other effectiveness measures)

5
Method to Obtain Small Business
Commodities

• Purchase Order
• Department's Internal Store
• Started to use intranet catalog
• Connected directly to Office Depot's system
  CAN/DO5
• Cal Card System
• Issued to limited number of FTB employees
• Used only for certain commodities, and for
  emergency only
• Nine approving officials monitor cardholders'
  purchases

6
Workflow Purchase Orders
Purchase Orders
FILL OUT FTB 6278
RUN THRU APPROVALS
SUPERVISOR ALLOTMENT COORDINATOR DIVISION CHIEF
AUTOMATION PROJECT
REVIEW FORM
ASSIGN LOCATOR
SEND TO AGENT
DETERMINE METHOD
CHECK IF VENDOR CERTIFIED
ENTER INFO IN P.M.S.
GENERATE P.O.
COPIES TO FISCAL ACCOUTING SERVICES SUPPLY
RECEIVING IN P.M.S.
DELIVER GOODS
STAMP PO
COPIES TO FISCAL ACCOUTING PURCHASING AGENT
PAY OR DISPUTE
7
Workflow Supply Store and Cal Card Orders
Supply Store Orders
Cal-Card Orders
8
Indication of Potential Improvement 1

• Planned automation of P.O. (form 6278) still
  needs manual input by purchasing agents and lack
  of standard in items description
• Empower end users
• Duplication of purchasing activities in P.O. and
  Supply Store and CC
• Eliminate duplication

9
Indication of Potential Improvement 2

• Average transaction cost is measured by
  purchasing unit level
• The total cost will be higher
• Approvals from Supervisor, Allotment Coordinator,
  and Division Chief are needed for small P.O.
• Time savings from automating the approval process
  will be significant

10
Problem Statement

• How to reduce the non-value adding time?
• Repetition, manual auditing approval, time-lag
• How to ensure aggregation and reduce non-contract
  purchase?
• By making current process more efficient or by
  total business process transformation?

11
Predicted Solutions

• Elimination of duplicated activities in order
  processing
• Automation of approval process
• Monitoring system for time for order routing and
  approval
• User friendly catalogs
• Incentive system that forces to use catalog system

12
Further Information Needed

• How long does Accounting department spend on
  average for the small purchases to investigate
  discrepancies?
• What is the typical lag between issuing a PO and
  receiving the goods?
• Which information is required and actually used
  for processing?