BuildIT Equipment Rental Process

Stakeholder Analysis
The owner of the equipment rental process of BuildIT is purchasing manager. The purchasing
manager is concerned by the growing volume of equipment rental expenses. In the past year, these
expenses have grown by 12% whereas the overall revenue earned from the construction activity
has grown by only 8%. The purchasing manager launches an improvement effort to bring down
the rental expenses by 5%. This objective is in line with overall target set by the CFO of 5% of
company-wide cost reductions.
An analyst is asked to review the rental process.
The analyst decides to start by gathering data from the process owner, site engineer, the clerk and
the works engineer, given their central role in the process. He proceeds with interviews in order to
derive deeper qualitative insights. The interviews are partly driven by the waste analysis—in
particular transportation, waiting, and defects, as well as the inventory waste.
After interviewing the process owner, the analyst noted two issues in the process:
(i) Equipment is often hired for longer than needed
(ii) Penalties are often being paid to the suppliers due to:
(a) equipment being returned upon receipt because it was not suitable for the job;
(b) late invoice payments.
The main concern of the customers of the process (site engineers) was the delay between the
moment they create an equipment rental and the moment the corresponding equipment arrives.
The analyst determines that this delay is of 3.5 working days on average (sometimes three,
sometimes 4 days, rarely less or more). The site engineer also confirmed that sometimes they have
to reject equipment when they receive it because the equipment is not suitable for the job—even
though they claim that in their requests, they clearly indicate what type of equipment is needed
and for what purpose.
On the other hand, the clerks’ main concerns are:
• Lack of clarity in the requirements they receive from the site engineers
• Inaccurate and incomplete equipment descriptions in the catalogs of the site engineer vendors.
• Slow turnaround times when asking the works engineers to approve the rental requests.
The works engineers echo the concerns of the purchasing managers that site engineers are
sometimes retaining the rented equipment for longer than strictly needed. They are aware that
sometimes the delivered equipment does not match the requirements of the site engineers and is
hence returned, but they do not perceive that this is a major issue.
The accounts payable team claims that they are aware of the fact that penalties are being paid for
late invoice payments. However, they claim that it is not their fault. In 98% of cases, invoices are
being paid at most three working days after their internal approval. The accounts payable
department claims that it is not possible to do faster, and that in any case, the penalties of late
invoices would still occur even if they could reduce the payment time from 3 days to 2 days.
The analyst also interviewed two suppliers, who echoed the fact that sometimes the delivered
equipment was rejected by the site engineer, and that invoices took too long to be paid. The
suppliers additionally perceived that there is a lack of integration between their systems and the
ones used internally at BuildIT. A supplier commented that this lack of integration could be one
of the reasons why mistakes were being made along the way.
1. Identify the stakeholders of the BuildIT equipment rental process. Justify your answers.
2. Which stakeholder’s perspective do you suggest as the best point for the process analyst to
start the analysis from? Justify our answer.
3. Discuss the waste involved in the two issues raised by the process owner.
4. Analyze the issues raised by every stakeholder. What are the possible issues you could
identify in the BuildIT equipment rental process in terms of expenses?

Issue Register
As a result of the stakeholder analysis, the analyst concluded that the issues raised by the process
owner were echoed by the customer (site engineer) and the other process participants. The analyst
also found three other perceived issues: one raised by the site engineer (delays in the rental process)
and two by the clerk (unclear site engineer requirements and inaccurate or incomplete catalog
data). The analyst decided not to include these perceived issues in the initial issue register, because
they appeared to be possible causes of the issues raised by the process owner, rather than top-level
issues on their own. Accordingly, the analyst proceeded to analyze the issues raised by the process
owner by gathering additional data about their frequency and the impact of each occurrence of
those issues.
Process Analyst found out that in 10% of the cases site engineers keep the equipment 2 days longer
than needed. He also found out that equipment rental cost per day is Rs. 100 and average rentals
per year is 3000. Each mistake caused by the BuildIT costs cost of one day of rental and this seems
happening for 5% of the rejections of equipment. It also found out that around 10% of invoices are
paid late and the penalty of late payment is 2% of the amount of invoice.

5. Prepare the Issue Register for the above issues and their related information in the BuildIT
equipment rental process

Pareto Analysis
Let us consider again the equipment rental process. This time we take the perspective of the site
engineer, whose goal is to have the required equipment available on site when needed. From his
perspective, the main issue is that in about 10% of cases, the requested equipment is not available
on site the day when it is required. When this happens, the site engineer contacts the suppliers
directly to resolve the issue, but still, resolving the issue may take several days. It is estimated that
each such delay costs Rs. 400 per day to BuildIT. By inspecting a random sample of delayed
equipment deliveries during a one-year period and investigating the cause of each occurrence, an
analyst found that:
 In total, five occurrences were due to the site engineer not having ordered the equipment with
sufficient advance notice: The site engineers ordered the equipment the day before it was
needed, when at least 2 days are needed. These cases cause delays of 1 day on average.
 Nine occurrences were due to the fact that none of BuildIT’s suppliers had the required type
of equipment available on the requested day. These cases cause delays of 1 to 4 days (3 days
on average).
 13 occurrences were due to the approval process taking too long (more than a day) due to
mistakes or misunderstandings. For these cases, the delay was 1 day on average.
 27 occurrences were due to the equipment having been delivered on time, but the equipment
was not suitable and the site engineer rejected it. These cases cause delays of 2 days on average.
 Four occurrences were due to mistakes or delays attributable entirely to the supplier. These
cases lead to delays of one day. However, in these cases, the supplier compensated BuildIT by
providing the equipment 2 days for free (the remaining days are still charged). Recall that the
average cost of an equipment rental per day is Rs. 100.
 For two occurrences, the analyst did not manage to determine the cause of the delay (the
process participants could not recall the details). The delays in these cases where 2 days per
occurrence.
The sample of analyzed occurrences represents around 20% of all occurrences of the issue during
a one-year period.
6. Draw a Pareto chart corresponding to the above data.