Best practices on cost reduction using Lean Six Sigma
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Transcript of Best practices on cost reduction using Lean Six Sigma
Best practices on cost reduction using Lean Six Sigma
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CenturyLink Overview
CenturyLink formed from the merger of two large telecom providers
$8.8 billion of revenue and $3.8 billion of EBITDA
Headquarter: Monroe, LA
S&P 500 company / expected to be Fortune 500
www.centurylink.com
3
Leading Communications Provider
4
EMBARQ BPI Evolution
2005 – 2006 EMBARQ separates from Sprint
- EMBARQ formed through spin-off from Sprint
- Focus on spin-off activities
2006 – 2007 Shotgun approach
- Heavy training/tool focus through Six Sigma
- Put it in the business & let them go
- Limited quantifiable benefit
2007 - 2008 Business partnership
- Moving away from tool focus
- Lots of projects
- Kaizen implemented to drive quick results
- Great business benefits, but lost in the business
2008 - 2009 Heavy initiative focus
- No tool focus (use the tools where appropriate)
- Don’t use the words Lean or Six Sigma (BPI only)
- Big quantifiable results!!!
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Business Process Improvement: Looking Back
Partnering with business units to work on business unit specific initiatives
WholesaleCompleted 2 Kaizen events: VoIP, Switch Access PIUFuture areas of focus include: Fiber Access, ICB
Special Pricing, Sonet Services
ConsumerCompleted 1 Kaizen event: Call EscalationFuture areas of focus include: Compensation Cycle
Time, IVR, Sales Reporting
BusinessLimited opportunities identifiedCurrently conducting analysis of operating metrics
within sales support and care function
NetworkCompleted 3 Kaizen Events: Ethernet Provisioning,
Fiber to the Premise (FTTP), ACTL POIFuture areas of focus include: NSM and Production
Planning assessment
Revenue ManagementCompleted BPM build for auto promo code processFuture areas of focus include: 7 Additional BPM builds
ITCurrently addressing Asset Recovery processesFuture areas of focus include: adding additional areas
for asset management
Business Consumer Wholesale Network Rev Mgmt ITBusinessBusinessBusiness ConsumerConsumerConsumer WholesaleWholesaleWholesale NetworkNetworkNetwork Rev MgmtRev MgmtRev Mgmt ITIT
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BPI Program Goals
Aggressively drive an enterprise-wide process improvement initiative• Agreed upon financial targets and timelines to realize those targets• Focused on helping achieve 2009/2010 business-wide targets• Develop detailed design information for the individual processes (sub-processes)
that result in the highest financial and/or customer impact• Support execution/implementation of the new processes, including
communications, management of organizational change and formal documentation of new processes
Focus on end-to-end efforts in addition to BU issues• Look specifically for agreement on key processes to attack for the initiative• Business-centric issues prioritized between each other to ensure optimal benefit• Create end-to-end design documentation including linkages to growth and
expense target plans, initial financial justification and determination of which of the sub-processes require detailed design documents
Ensure that gains are recognized and sustainable• Establish a program management function to ensure that the process changes
hold and, as importantly, that the planned benefits are being achieved
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Phase 1
L
LL
L
S
LLLLLLD
<-X% Growth>
L
P
IT
IT
~$200M
Operating Costs
Revenue
L
L
S
S
L
S
S
Supply Chain
Supply Chain
HRFinance
~$150M
Billing
~$100M
Field OpsProvisioningOrder ManagementCall CenterField Sales
L
L
L
L
HR
~$30M
Finance
~$250M
Network
~$950M
Channels
~$450M
L
L
P
S
S
L
L
LSSLLAccess
LLLSLCLECWholesale
$1.8B
PPPSPEnterprise
PPPSPDSL
25% Growth*
PPSSPMulti-LineBusiness
$1.5B
PPPSLDSL
52% Growth*
SSLSLPOTS
<-6% Growth>Consumer
$2.6B
L
LL
L
S
LLLLLLD
<-X% Growth>
L
P
IT
IT
~$200M
Operating Costs
Revenue
L
L
S
S
L
S
S
Supply Chain
Supply Chain
HRFinance
~$150M
Billing
~$100M
Field OpsProvisioningOrder ManagementCall CenterField Sales
L
L
L
L
HR
~$30M
Finance
~$250M
Network
~$950M
Channels
~$450M
L
L
P
S
S
L
L
LSSLLAccess
LLLSLCLECWholesale
$1.8B
PPPSPEnterprise
PPPSPDSL
25% Growth*
PPSSPMulti-LineBusiness
$1.5B
PPPSLDSL
52% Growth*
SSLSLPOTS
<-6% Growth>Consumer
$2.6B
P – Primary Focus S – Secondary Focus L – Low Focus
A disproportionately high % of opex is associated with order-to-cash for DSL and business products.
* 2006 10-K
© Deloitte Touche Tohmatsu 2004. All rights reserved. 0104
D el o i t t e T el eco mmun i cat i o n s I n dus t ry V al ue Map
C o n d en sed V ers i o n(Practical paths to increase shareholder value)
It’s easy to say shareholder value is important. Not so easy to make it influence the decisions that are made every day: where to spend time and resources, how best to get things done, and, ultimately, how to win in the competitive marketplace.
This Map is designed to accelerate the connection between actions you can take and shareholder value. It is not rocket science and it is not complete, but it can jump-start the process of focusing on the things that matter most and then choosing practical ways to get them done.
Here are two simple ways to use it:§ Start at the top. Working your way
down, at each step ask yourself, How will we improve this? This will help ensure that your tactics support your objectives.
§ Start at the bottom. Working your way up, at each step ask yourself, Why are we doing this? This will help ensure that every tactic leads to shareholder value.
Revenue Growth
Current CustomerVolume
New CustomerVolume
Price Realization
Churn Reduction
Increase Tenure of Customer
Relationships
Increase Breadth of Customer
Relationships
Offer Innovative Products
& Services
Offer Innovative Products
& Services
Acquire New Customers
Analyze & ManagePricing
Barriers to Switching
Service Effectiveness
Cross-Sell / Up-Sell
Voice & Data Usage
Voice & DataDevelopment
Product Awareness
Voice & DataDevelopment
Product Awareness
Brand Awareness
Customer Reach
Demand & Supply Management
Price Optimization
Operating Margin(after taxes)
Sales & Retention
Cost of Services (COS)
General & Administrative Income Taxes
Improve Sales & Marketing
Efficiency
Improve Product
Development Efficiency
Improve Network
Efficiency
Improve Logistics & Service
Efficiency
Marketing & Advertising
Direct Sales
Indirect Sales
Customer Segmentation &
Treatment
Product Development
Logistics & Distribution
Handset & Device Merchandising
Engineering & Operations
Network Operations (NOC)
Improve Corporate & Shared
ServiceEfficiency
Customer Service & Support
Order Fulfillment & Billing
IT & Backoffice
Procurement
Human Resources
Real Estate & Infrastructure
Business Management
Financial Management
Improve Income TaxEfficiency
Income TaxManagement
Asset Efficiency
Property, Plant& Equipment
(PP&E)Inventory Receivables
& Payables
Improve PP&E
Efficiency
Improve Inventory & Spares
Efficiency
Improve Receivables &
PayablesEfficiency
Real Estate & Infrastructure
Networks
Handset & Device
Network Equipment
Accounts, Notes & Interest Receivable
Accounts, Notes & Interest Payable
Expectations
External Factors
Company Strengths
Improve Management &
Governance Effectiveness
Improve Execution
Capabilities
Governance
Business Planning
Program Delivery
Business Performance Management
Operational Excellence
Partnership & Collaboration
Relationship Strength
Agility & Flexibility
Shareholder Value
• Establish and prioritize the list of end-to-end processes to be reviewed
• Allocate team members based upon highest return/highest impact processes
Concurrently:
Establish impacts to the overall enterprise and the associated interactions
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The Business Process Improvement Approach
High SpeedInternet
Identificationof
core focusareas
within &acrosslanes
EMBARQ BPI Analysis
ImprovementOpportunities& Roadmaps
New BuildEconomics
Supplier Contracts
Parts & Materials
CustomerContracts
Extensive Data Collection
Overall Objective:
Identify tangible improvement
opportunities aligned to EMBARQ’s 3 year
operating plan
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What we’ve heard …
End to End Process Ownership
•We have limited E2E process ownership and/or metrics to sustain on-going change
•Multiple VPs touch each process•Competing initiatives appear
across processes•Fixes in one area cause problems in
another • Individual measures need to support
broad process changes
Help Enable Change
•People have indicated they’re ready for improvements, but …
•Broad change causes anxiety•People are reluctant to suggest
cross-functional change•“We tried that in the past” and
“It will never work” resistance•Need to align compensation /
rewards with process goals
Better Forecasting is a Necessity
•Vendor’s require excessive lead time and our costs increase due to limited forecasting
•We’re missing revenue due to our inability to tie exhaust to customer forecast
•Capital planning is sub-optimal•We overstock because of forecasting
variability
Data Issues
•Unnecessary truck rolls due to poor plant data quality
•We’re not fully leveraging assets due to our inability to track them
•We’re less efficient due to multiple re-keying and data errors during the customer provisioning process
Common Pain
Points
Several broad themes span the individual BPI process areas.
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Phase II
Design Solution
Assign Inventory
Request 3rd Party Service if Required
Carry Out Dispatch Tasks
Activate Service
Send Trigger to Billing
Enter Customer’s Full Contact Details
Check Availability / Coverage for DSL
Check Customer’s Eligibility (e.g. credit)
Determine Payment Method and Create the Customer’s Sub-Billing Account
Reserve Technician for Best Available Date
Check Inventory If Necessary
Collect Deposit or Initial Fees
Submit Order
Check Zip Against Database
Check Service Availability w/ 3rd Party or Other Carrier
Arrange Customer Premise Survey if Necessary
Feasibility / ROI Check if no Current Availability
Bill Calculation
Invoice Applied
Invoice Generated
Customer Wants DSL
Service
Generate Payment
Reconcile Payment
Apply Payment In Customer Account
Apply Payment In General Ledger
DSL Service Order to Delivery E2E Process
Customer Gets DSL Service
Customer Call
Call Center Network Team Billing Finance
Siebel
ZIP Catalog / GIS
OSS Systems
Billing Systems
ERP
Feed from Pricing Engine
Incorporated into Monthly Statement
Process Flows Kaizen Information Procedure Manuals
Design Solution
Assign Inventory
Request 3rd Party Service if Required
Carry Out Dispatch Tasks
Activate Service
Send Trigger to Billing
Enter Customer’s Full Contact Details
Check Availability / Coverage for DSL
Check Customer’s Eligibility (e.g. credit)
Determine Payment Method and Create the Customer’s Sub-Billing Account
Reserve Technician for Best Available Date
Check Inventory If Necessary
Collect Deposit or Initial Fees
Submit Order
Check Zip Against Database
Check Service Availability w/ 3rd Party or Other Carrier
Arrange Customer Premise Survey if Necessary
Feasibility / ROI Check if no Current Availability
Bill Calculation
Invoice Applied
Invoice Generated
Customer Wants DSL
Service
Generate Payment
Reconcile Payment
Apply Payment In Customer Account
Apply Payment In General Ledger
DSL Service Order to Delivery E2E Process
Customer Gets DSL Service
Customer Call
Call Center Network Team Billing Finance
Siebel
ZIP Catalog / GIS
OSS Systems
Billing Systems
ERP
Feed from Pricing Engine
Incorporated into Monthly Statement
Key Metrics
Average Handle TimeService Level (%)Productivity (%)
Key Metrics
Good Jobs in 8% Commitments Met - Service Orders
(HSI)Percent Repeat Tickets (HSI)
Key Metrics
% rating errors per dayTime to resolve customer queries
Key Metrics
# of nopays$$ collected vs. $$ Spent
1 x $9 (initial order)
2 x $4 (chase-ups) 1.2 x $110 (Truck Roll)
1.1 x $20 (Activation)
1 x $2 (Invoice)
0.3 x $5 (Bill Query)
0.01 x $50 (nopay)
Incr
em
en
tal
Cos
t
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Process Steps
Legend
1) Linked Process Impacts –
2) Areas of High Cost Impact –
3) Sub-Process For Drill Down –
• Capture existing processes and metrics including current costs by function
• Identify appropriate approaches to solve associated problems
• Provide an end-to-end graphical view of process steps and cost impact
• Determine highest cross functional impact
• Gain executive buy-in on proposed changes and benefits
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Phase III
• Execute design sessions for sub-processes that were identified during Phase II
• Develop a plan for the quantification and ongoing measurement of the planned improvements
• Revise the end-to-end maps based upon the detailed design sessions
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Supplier Contracts
Key Accomplishments:Contract Compliance
• Identified root causes of violation spend • Updated Network methods & procedures, posted updates to Network Services intranet site and
delivered training to address identified gapsSupplier Management
• Completed scorecard assessments and executive review sessions with 12 critical suppliers (integrated supplier risk management into program)
• Integrated supplier risk management (financial & IP) into the program & executive discussions
Planned Actual
Contract Compliance:
Conducted audits of non-PO violation spend in Network and Business Operations
Completed as planned
Held Kaizen session to align M&P’s with fiscal & sourcing policies Completed as planned
Delivered training on M&P’s/policies Completed as planned
Conduct ongoing quarterly audits to continually address future violations Audits suspended in 2009 due to merger/resource constraints and anticipated NewCo process changes
Supplier Management:
Development of scorecard/methodology Completed as planned
Conduct executive review sessions with identified suppliers Completed as planned
Developed 3-4 strategic-level improvement areas with each supplier Business units continue to execute on plans
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Supplier Contracts
Planned Actual
Reduce excess cable in field locations by $XX
Recovered and used $XX of cable
Conduct Clean Sweeps in 20 locations by year-end. Target recovery of $XX of unused assets.
•Recovered to inventory - $XX plus over $XX in plug-in cards
•Consignment sales - $XX
•Scrap Sales - $XX
•XX pallets of product
Add images and plain English descriptions to the TONES catalog
The majority of all items were completed by year-end (over 3000 products)
Improve Supplier Performance – Delivery to Lead Time for top 8 suppliers
•X of X currently above XX%.
•One supplier dropped due to decreased spend.
•Seven suppliers improved year-over-year
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Customer Contracts
Initiative Before BPI After BPI
Government Repository
(Pramata)
• The contract repository tool (ASP) stores contracts by year which made gathering the entire contract difficult.
• Not all contracts were stored in ASP – some resided with sales personnel in the field or could not be located at all
• Special Ts&Cs were not consistently identified and managed
• Government contracts will be centrally stored and easily accessible.
• Key/special terms and conditions are extracted and catalogued in a contract summary
• Data requests can be managed quickly via repository reporting capabilities
• Contract with Pramata is expandable to other contract types, for example supplier and real estate
• Provided an overview and demonstration to CTL. Reviewing possible integration with their contracts
Terms and Conditions
• Uncertainty as to what contract documents existed
• Terms and conditions were not consistent across documents and may have been outdated or non-applicable to today’s operating environment
• Clear understanding of what contracting documents and gaps exist
• Internally provided a website matching the tariffs, terms and conditions to the product Improvement recommendations prioritized and in progress
15
New Build Economics
Accomplishments Results
• Stood up Capital Targeting Tool for evaluation of projects to determine economic viability
• Billing and deposit methodology was created and implemented in cases where it was determined developer assistance was required
• Generated shareholder value through investing only in those New Builds which offer an opportunity for an acceptable return
• Completed cost structure reviews leading to work with vendors for cost reduction, best practice implementation and training for more efficient use of capital and labor
• Continue project reviews for New Service Addresses in 2009
• Continuing process improvement
• Brings efficiency and consistency to the economic evaluation process; XX projects were reviewed from May to December
• XX bills have been calculated and sent to developer for deposit or aid to construction
• Projects found to be uneconomic resulted in a Cap-Ex reduction of $XX
• The process improvement initiatives provided for a XX% cost decline in our preferred FTTP technology
• $XX is forecast to be reviewed and billed due to economic viability
• Reduced cycle times, economic review completed in farther in advance of project construction dates
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High Speed Internet
Focus Area
Initiative Objective Annual Benefit
HSI Equipment
Systematic CPE Recovery on Cancelled Orders
Recover HSI equipment from customer if the order was cancelled.$XX
Optimize Shipping Change HSI order due date & RAS date from 2 to 3 days. $XX
Tangible Customer Facing Equipment
Implement database to store, trace and help proactively troubleshoot new and refurbished equipment serial #’s at the household level.
$XX to $XX Flexible pricing strategy
(Numbers based on CenTel current modem lease program)
Records Clean-Up
Pre-Grooming & Records Clean-Up Pilot
Verify and correct records and pre-groom all primary capable lines in the Gardner market. Conducted pre-pilot time and motion study baseline the pilot in the Gardner market.
Reduced dispatches & clear times Fewer trouble calls & internal calls to support groups
0, -1, +1 MEDR Errors Address unnecessary escalations that are a result of errors in MEDR. Improve process for correcting records.
$XX rev opportunity Fewer trouble calls
Dispatch Reduction
Cancelled Order Dispatch Reduce/eliminate rolling trucks on cancelled orders. $XX cost avoidance
Cancelled Order Revenue Prevent XX% of cancelled orders due to reducing capacity management and records issues.
$XX rev opportunity
Dispatch Report by Tech Support Center
Measurable tool to hold centers accountable by total customer experience vs. metric
TBD
Capacity Management
Network/Marketing Communication
Ensure all Business units are proactively and consistently providing campaign and utilization information
TBD
Underutilized Devices RCA, Identify Process Improvements and Implement changes $XX for each 1% increase in utilization
Training & Communication
Replacement HSI CPE Reduction
Reduce unnecessary replacements through detailed agent reporting and online training.
$XX
Retail HSI CPE Focus Increase Retail pick up option for necessary HSI CPE replacements. $XX
External Customer Training Online HSI customer training modules for key & high volume topics TBD
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Summary
Targeted approach worked best for EMBARQ• Find the 5 biggest issues confronting the business• Dogged approach
Leadership engagement the key – can’t be successful without
Cannot lead with the tools – goes in one ear and out the other
Lead with results – don’t even talk about the tools unless necessary