Travel Services Report
Recommendation:That the following report be received for information.
Report Summary
This is an information report from the Finance Branch, Corporate Services Department and Asset Management and Public Works Department. It provides a status update with respect to the project, Assessment of Supply Management Strategies.
Previous Council/Committee Action
At the January 5, 1999, City Council meeting the following motion was passed:
“That the Administration provide City Council with a status update with respect to its project assessment of supply management strategies at the first City Council meeting in February, 2000.”
Report
· Of the 26 recommendations presented in the Auditor General’s report 15 have been implemented. An additional 10 are in the process of being implemented and will be completed during 2000. The remaining item will be reviewed during 2000 and a determination will be made on how to proceed.
· Central Stores approved budget for 1998 was $943,400, the budget request for 2000 net of inventory write down provisions is $488,000, a reduction of some $455,000 or 52%. This reduction can be attributed to a combination of the implementation of the Auditor’s recommendations and other City ’97 initiatives.
· Reduction in inventory of $492,000 has occurred through the elimination of unnecessary inventory.
· Economic benefit of $47,000 (November, year to date), has been obtained by providing supply management programs to external organizations on a cost plus basis.
· Three contracts for Vendor Managed Inventories have been established.
Background Information Attached
- Assessment of Supply Management Strategies - summary report of the status of all recommendations contained in the Assessment of Supply Management Strategies report issued by the Office of the Auditor General on July 28, 1998.
- Chart of Central Stores - Average Item Pick Rate.
- Central Stores Billing Customer List.
(Page 8 of 1)
Attachment 1
Assessment of Supply Management Strategies - Report Summary Status
Recommendation / Administration’s Comment / Status(IV.1)
The City expand the electronic requisitioning system in conjunction with broader information technology initiatives to eventually replace the paper and Material Requisition Form. / Agree
All employees who have terminals should be granted access to SAP for the purpose of electronic requisitioning, within the scope of their responsibilities.
The major difficulties to implementing this recommendation are the lack of sufficient computer terminals across the City and the need for an extensive SAP training program.
Most data entry activities in SAP require accessing a number of screens, and for someone who orders materials infrequently, it can be difficult to remember the proper sequences and protocols. Accordingly, frequency of use will be a key factor in implementing this recommendation. / In Progress
As of December 1, 1999 electronic requesting and purchasing access and training has been provided to;
287 departmental staff - Stores requisitioning
325 departmental staff - purchase requisitioning
363 departmental staff – low value purchasing
(IV.2)
CCS review the current delivery system and schedule to improve order turnaround time to deliver 90% of orders to users within 48 hours of order placement. / Agree
CCS has negotiated delivery schedules with its customers and it should meet those schedules for deliveries of goods from stock 90% of the time. However, some customers can plan ahead and do not require 48 hour service. We would not endorse expending extra costs for faster delivery service when it is not required. / Completed
Delivery driver positions have been eliminated through attrition and private couriers are now used, all deliveries are made on a daily or scheduled basis.
(IV.3)
CCS eliminate phone-in orders by expanding the use of procurement cards for Parks and Recreation and Building Maintenance field staff. / Agree
For Parks and Recreation (now Community Services) and Building Maintenance field staff who have procurement cards they need not phone CCS for service. However, for customers who do not have procurement cards or SAP systems access they may continue to phone CCS for service. / Completed
The Office of the Auditor General conducted a review of Corporate Payment Cards this summer and has reported (page 4 of the report) that Community Services (Parks and Recreation) and Asset Management & Public Works (Building Maintenance) hold 89 and 103 Corporate Credit Cards respectively. These departmental staff no longer phone to CCS for orders.
(IV.4)
MES and Transit design a new parts management process that integrates the work order, part number, stock number and vendor’s catalogue and is supported by electronic linkages between the user, stores and vendor, and develop an implementation plan based on a more detailed cost benefit analysis. / Agree
This concept is part of the MESIS+ã vision developed by MES in 1994 and is described in section 21, Parts Management, of the System Architecture document produced by DMR Associates. At the time, an evaluation of possible enhancements to the MESIS+ã system was carried out with the idea that we would incorporate as many of them as possible when rewriting the system as part of its migration from the UNISYS mainframe to AIX.
It was not possible to develop the concept further because of the short timeframe before the UNISYS would be decommissioned, and because the concept would increase the cost, complexity and risk of the project by an order of magnitude.
In addition, the concept could not be cost justified if it were developed just for the City; it would have to be marketed widely so that development costs could be spread over many users.
The industry has advanced since then, so that some necessary components are now appearing on the market. MES has recently acquired a piece of software called ‘AllData’ which provides the front-end functionality. With AllData software the mechanic identifies the make and model of vehicle and ‘AllData’ displays a diagram of the vehicle and allows the mechanic to drill down into the components of interest until he has identified the correct manufacturers part number.
This software carries information about cars and light trucks up to one-ton which is only about 35% of the fleet. It does not include information on larger trucks, buses, trailers, or any of the myriad of specialized equipment used in municipal operations. MES will continue to follow developments in the industry and to work with local suppliers to develop more efficient systems for acquiring parts, but the complications of developing partnerships with our many suppliers make this a long term goal. / In progress
The Department’s original “Administration Comment” made note of prohibitive costs to develop software to meet the above mentioned goals, that MES would continue to evaluate industry offerings and work with local suppliers for the development of more efficient systems. MES currently uses ALLDATA, a commercial product common to other commercial repair enterprises. The system supports parts requisition with unit diagrams, manufacturers’ part number, pricing, and electronic allocation to a work order. The system is limited to popular cars and trucks, but suggests it will expand the heavy truck area. More and more the Branch is acquiring added parts and diagnostic support in the form of CD’s (e.g. new buses). Whereas the electronic linkage between user, vendor and/or stores has yet to occur, advances in Internet capabilities and e-commerce may provide the best cost-effective solution. In addition to the work carried out by MES, Materials Management Branch advises they have forwarded this recommendation to the ERP Committee for review. MES will continue to evaluate cost effective opportunities to fulfil recommendation as a long-term objective.
(IV.5)
Construction develop an electronic interface between SAP and the department’s job costing system. / Agree
Any initiative to improve systems connectivity is welcomed. However, this will be subject to the costs and benefits associated with making these systems enhancements. This issue is being addressed as part of the Application Rationalization Study currently being conducted by Deliotte & Touche on behalf of the IT Branch. / In Progress
The priority for IDMS in Design and Construction is to provide management with timely and accurate job costing information to make informed decisions. It was not designed to be an accounts receivable and payable system. As such, significant effort will be needed for electronic interfacing with SAP. Due to corporate priorities, enhancements for IDMS and electronic interface with SAP were on hold and will be explored early next year.
(IV.6)
The City implement an Evaluated Receipt Settlement system to improve the efficiency of the accounts payable process for supplies. / Agree
Evaluated Receipt Settlement process is in progress as a City ’97 initiative. / Completed
Purchase Order D876835 was issued on January 5, 1999 for Bus repair parts, this purchase order uses Evaluated Receipt Settlement (ERS) as a payment settlement method.
At that time a working team was created to monitor the progress of this order before adding more ERS vendors. Unfortunately, due to staff changes and terminations brought about by Finance Branch restructuring activities the working team’s activity was delayed.
A new team has now been formed and will be moving ahead to add additional ERS vendors. The objective for 2000 is to have at least 30 ERS vendors in place.
Notwithstanding the above, an Evaluated Receipt Settlement system has been implemented as recommended.
(IV.7)
Purchasing increase the dollar limit for local purchase orders for suppliers to at least $2,000 to decrease the order turnaround time. This should include an exception for out-of-town orders for departments like Transit who have a significant number of non-local vendors. / Agree
The limits for local purchase orders have been raised to $5,000 and include vendors within Canada with fewer commodity restrictions. The roll out of this change is in progress as a City ’97 initiative. / Completed
On April 21, 1998 Materials Management Procedure No. 7.01, Low Value, CPC, Sign-Off And Multi-List Payments was revised. Dollar Limits were raised to $5,000.00 to include all vendors in Canada and with fewer commodity restrictions. These changes have been implemented across the City.
(IV.8)
The City expand the use of procurement cards for low dollar value supply purchase transactions (i.e., less than $100 per purchase). / Agree
The expanded use of Procurement Cards is in progress as a City ’97 initiative, the dollar limit have been raised to $5,000 and includes vendors within Canada with fewer commodity restrictions. / In Progress
A new Credit Card is about to be introduced for wide use throughout the City. It use will allow for a number of data processing improvements, including automatic accounting defaults and on-line statement reconciliation and approval. It is anticipated that computer software changes will be completed this year and the new Credit Card system will be in use early in the new year.
(IV.9)
The City review existing accounting policies and procedures in conjunction with expanded procurement card use with a view to obtain the optimal balance between transaction detail that needs to be captured for certain transactions and the features of the procurement card in order to realize associated benefits. / Agree
A Request for Proposal for Corporate Procurement Cards is in progress, one of the features requested is a cost accounting option. The degree to which this can be implemented will depend on the outcome of the accounting policies and procedures review made by the Financial Policies Division. / In Progress
See above.
(V.1)
Transit maintenance and warehouse managers evaluate the usage of kits in order to optimize the economics of both the repair and parts management processes. / Agree
The practice in the Davies (Transit) heavy repair shop has been to issue kits of parts for engine and transmission rebuilds. These kits include all the most likely parts requiring replacement. MES will review the decision making process of the mechanics carrying out the overhaul with respect to which parts are used and which are returned to stock. We will also evaluate whether the use of kits should be expanded into other areas of MES, taking into consideration the time required for the mechanic to develop a list of parts each time a repetitive repair is undertaken should a ‘kit’ approach not be taken. / Completed
For the year to date, up to November 30, 1999 the following parts kits have been utilized for bus maintenance operations.
Quantity Kit Description
29 6V-71 Engine kit
62 VH Allison Transmission
25 V730 Allison Transmission
17 ZF Transmission
29 Blower, Head & Hydraulic Fan Kits’
Additionally;
MES and Materials Management have formed a collaborative team to evaluate a number of parts and material supply issues. The team selected performance measures, mapped internal processes, conducted preliminary surveys to select organisations with similar fleets and supply needs, conducted site visits, identified internal improvement opportunities, and is currently finalizing their report. The report will address “best practice” for the support and supply of materials. The report will discuss alternative models, test opportunities, inventory recommendations (including kits), and recommend how best to modify internal systems and processes to the recommended model.
(V.2)
Materials Management implement procedures to reduce the cycle count discrepancy rate to less than 5% in each warehouse. / Agreed with modification
A single target discrepancy rate for all warehouses may not be relevant to achieving the goals of the cycle count process and such a target may become a goal in its own right rather than an indicator of problems in the warehousing system. We will review the cycle count process and establish an acceptable discrepancy rate as it relates to each individual warehouse. Discrepancies will be reduced to the lowest possible rate and any discrepancies in excess of the established acceptable rate will be investigated to determine reasons. / In Progress
As noted above this recommendation is being handled as part of the “best practice” report.
(V.3)
Materials Management investigate alternative service delivery options for supplies and services that are currently provided through the Construction warehouse. / Agree
We are prepared over the long term to investigate alternative service delivery options for supplies and services provided through the Construction warehouse.
We would note, however that the Construction warehouse operations are modest and diverse and as KPMG discovered there is not one single service provider who can offer the services of CCS. It is therefore unlikely that one will be available for the Construction warehouse in the short term.