Operations Management - Cost Reduction Process Re-engineering
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Transcript of Operations Management - Cost Reduction Process Re-engineering
Cost Reduction InitiativeProcess Re-engineering
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction Initiative: Process Re-engineering
Cost Reduction InitiativeProcess Re-engineering
Introduction
• Cost Reduction – Reducing existing unit cost of the goods
manufactured or services rendered without compromising on the quality
• Process Re-engineering– Analyzing the current sequence of related tasks
which make up a business activity and redesigning the workflow to achieve increased efficiency and effectiveness of the process.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Case Study
Duplicate Bill dispatch Process of a Telecom firm
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Disclaimer note: This study is taken from a real life challenge faced by me (Manohar) on around May 2004, while I was working with a telecom firm between 2003 & 2006. At that time, I was a Senior executive in the Offline Department, handling the unit for Legal & TRAI related communications.
The Duplicate bill dispatch unit, another unit within offline department was faced with severe challenges. During that time , coincidently the operation manager, the process manager & the team leader for the Offline department were on unavoidable long leaves.
As a senior member of the offline department, I took the responsibility of solving the crisis in the Duplicate bill dispatch unit.
Most of the figures mentioned in the study are real practical figures. However, since this study is presented 6 years after the incident, few figures may vary.
Cost Reduction InitiativeProcess Re-engineering
Facts
Case Study follows………
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
The activity Duplicate Bill dispatch Unit
• Every month postpaid mobile users are sent hard copy of the usage bills as per their billing cycle.
• Some users require duplicate copy of the bills.• Such users request for the same at the call centre. • Front office executives raise request Cases in CRM
with SLA of 4 working days.• Back office executives– Take the dump of such cases from the CRM.– Open the relevant bills & shoot printouts.– Stuff bills in envelopes , dispatch & Close the case in CRM.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
ChallengesAs on May 2004
• Queue of 34,000 backlog cases• Constant inflow of 2000 new cases per day .• Average time taken to log one case in CRM was 1.5
minutes.• Only 9 back office executives to handle this queue
with 8 man hours per person per day.• Average time taken to solve one case was 8 minutes.• Total productivity of the unit was closure of 540 cases
per day .
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Projections
• With the prevalent trend the projections of inefficiency were as follows:
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Day Opening balance
Average New cases
per day
Total number
of AgentsMan minutes
per personMinutes reqd Per
case
Cases closed per
person
Total cases closed
Closing balance
Day 1 34000 2000 9 480 8 60 540 35460
Day 2 35460 2000 9 480 8 60 540 36920
Day 3 36920 2000 9 480 8 60 540 38380
Day 4 38380 2000 9 480 8 60 540 39840
Day 5 39840 2000 9 480 8 60 540 41300
Day 6 41300 2000 9 480 8 60 540 42760
Cost Reduction InitiativeProcess Re-engineering
Costs of Operation
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Per seat Per hour in $
Cost Per seat Per hour in
Rs.
Cost Per seat Per minute
Rs.
Salary per person
per month Rs.
Average Number
of working days per month
Man hours available
per day for work per person
Cost of wages
per hour Rs.
Cost of wages
per Minute
Rs.
Total Cost of
attending a Case Per minute Rs.
2.5 120 2 7000 25 8 35 0.58 2.58
Time taken to log per case in
minutes
Time taken to Solve per case
in minutes
Total time to Attend a case
in minutes
Total Cost of
attending a Case Rs.
Average Printing cost per case Rs.
Stationery & Dispatch Cost per case Rs.
Total cost per case
Rs.
1.5 8 9.5 24.54 1 30 55.54
Every day 2000 new cases are created; i.e. Rs.1,11,083.33/- is required to process them
Cost Reduction InitiativeProcess Re-engineering
Operations analysis
Case Study follows………
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Key Problem Areas
1. High inflow of requests2. High processing time3. Less Man power
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Root causes
1. High Inflow of requests– The AHT target for the front office executives were reduced from 6
minutes to 4 minutes leading to lesser available time for customer interaction and cases were created in CRM without proper probing.
– The process guidelines for front office executives emphasized on how & where to create cases for Duplicate bill requests. Due emphasis on when to create cases & probing were not given.
– Provision for FTRs were not available in the process.– Alternative solutions for the customers were not built in the system.– Customers are already sent Original copies of the bill. Scenarios on
why a customer will require a duplicate copy were not studied.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Root causes
2. High Processing Time– Each Back office executive was taking dump individually from the
CRM and working on it.– The existing CRM which was built using Java & Oracle was slow in
downloading the copies of the bills in PDF format from the billing server. Each bill took on an average 4 minutes to open.
– Few back office executives were not using advance MS-Excel options and Keyboard short cut keys for processing the cases.
– There were no dedicated Printer available for the duplicate billing unit. The available printer was shared by the entire floor operations. This affected the print wait time & the system resources.
– The executives were also involved in less intelligent tasks like collecting the printouts, stuffing the bills in envelopes and Zone wise segregation of mails, etc.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Root causes
3. Less Man Power– Duplicate billing unit was not treated as an individual unit.– The basis of Man power requirement calculations, made for other back
office units, were replicated for the duplicate billing unit.– The domino effect of a policy change in the front office operations
were not foreseen.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Solutions
Case Study follows………
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Reducing Inflow
• Scenarios/ Actions to take: – Customer has not received Original bill
• May be the customer is not aware of the 10 day wait period for receiving the bills after bill generation - Inform the customer to wait.
• Wrong Customer address in the system - Make corrections to avoid repeat request from the customer in future.
• Lost in transits - Check the trail & Inform the dispatch unit about the errors.
– Customer has lost Original bill • Provide. Add a nominal charge for the second copy
– Customer requires one more copy• Customer wants to submit a copy to his office & keep original for his records -
Customer should informed about the time taken for the delivery of duplicate copy & the cost involved. Advise the customer to take photocopies.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Reducing Inflow
• Alternative FTR options– Customer can walk into the nearest local customer service
centre of the telecom firm and request for the same.– The soft copies of the bill can be sent as an email to the
customer & print outs of the same can be taken.– The website of the telecom firm can have a provision from
where customer can log in to his account & take printout of the bills.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Improving Process time
1. Taking the dump from the CRM – This task was taken over by the supervisor (Me), work sheets for each
individual back office executive were prepared & allocated to them. This avoided replication of a case & increased the time available for the back office executives.
2. Direct access to the billing server (mirror view)– Instead of viewing the bills from the CRM, a mirror view of the billing
server was created in coordination with the billing team & IT and the link for the same was provided to the back office executives. This aided the back office executives to access the bills in less than a minute.
3. Training– Back office executives were trained on using advance MS-Excel options
and Keyboard short cut keys.Prepared By: Manohar M. M. Iyer
VAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Improving Process time
4. Printer– In coordination with the Administration & IT, all the existing printers in
the floor were reallocated to various departments & one dedicated printer for the Duplicate billing unit was recognized. This reduced the print wait time & provided more system resources.
5. Less Intelligent tasks– Less intelligent tasks like collecting the printouts, stuffing the bills in
envelopes and Zone wise segregation of mails, etc were allocated to office boys (with lesser salaries) in the dispatch unit after due training. This aided the back office executives to concentrate only on processing the cases.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Man powerfor existing challenge & BAU operations
– The HR was educated on the operational differences between Duplicate billing unit & other back office units
– Also the importance that how a policy change in the front office operations can affect the back office operations was demonstrated.
– To handle the existing challenges in the unit the HR was ready to provide extra man power to the unit by way of new recruits.
– Instead of new recruits the HR was advised to allow an option to existing workforce in other units to work on over time basis before or after their regular shifts @ Rs.40/- per hour per person. An average of 75 CSRs volunteered for 2 hours every day.
– The supervisor (me) took the onus of providing process training to them.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Results
Case Study follows………
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Effects on the Inflow
• Repeat calls for the same request, from all those customers educated & habituated with alternative routes for obtaining the duplicate bills, were almost nil.
• The CRM was constantly updated with corrected address of the customer leading to increase in receipts of original bills
• New FTRs made available in the system• All this resulted in drastic reduction in the number of cases for
Duplicate bills logged in the CRM. Within a month the daily inflow reduced by 50% on an average.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Effects on Process Time
• The only task left for the back office executives were to Open the relevant bills & shoot printouts as the dump were readily provided to them & post printout tasks were handled by office boys.
• The access time for opening the relevant bills was reduced by 3 minutes per case due to direct read access on the billing server .
• More system time was available for shooting printouts, since the print wait time was reduced due to availability of a dedicated printer.
• Also the executives were more skilled & quicker in processing the requests to the training provided on advance MS-excel options.
• Due to all this the process time for the back office was reduced by 60%.• However due to inclusion of probing in the front office process, their
process time increased by 1 minute per case.• The overall process time per case was reduced from 9.5 minutes to 5.7
minutes.
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
Revised costs of Operation
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Cost Per seat Per hour in $
Cost Per seat Per hour in
Rs.
Cost Per seat Per minute in Minutes Rs.
Salary per person
per month Rs.
Average Number
of working days per month
Man hours available
per day for work per person
Cost of wages
per hour Rs.
Cost of wages
per Minute
Rs.
Total Cost of
attending a Case Per minute Rs.
2.5 120 2 7000 25 8 35 0.58 2.58
If 2000 new cases are created everyday, Rs. 91,790.00/- is required to process them i.e. Rs. 19,293.33 lesser.
Time taken to log per case in
minutes
Time taken to Solve per case
in minutes
Total time to Attend a case
in minutes
Total Cost of
attending a Case Rs.
Cost of wages per Minute of office boy
@ Rs. 2000 per month
Average Printing cost per case Rs.
Stationery & Dispatch
Cost per case Rs.
Total cost per case
Rs.
2.5 3.2 5.7 14.73 0.17 1 30 45.90
Cost Reduction InitiativeProcess Re-engineering
Comparison of Costs
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005
Intial After one month
Difference saved per day
Average cost to slove per case 55.54 45.90 9.65
Number of cases created per day 2000.00 1000.00 1000.00
Total Cost per day 111083.33 45895.00 65188.33
Cost Reduction InitiativeProcess Re-engineering
Thus due to Cost reduction initiatives & the process
reengineering the telecom firm started saving on an average
Rs.65,188.33/- per day on the cost of operations of Duplicate bill
dispatch unit.Prepared By: Manohar M. M. Iyer
VAS2010XMBA15P005
Cost Reduction InitiativeProcess Re-engineering
I thank one and all who have provided me with the opportunity to handle this responsibility and the knowledge & support to prepare this Presentation. Please feel free to forward your valuable feedback, comments, queries and suggestions related to this presentation at [email protected] Thank you, Warm regards, Manohar M. M. Iyer
Prepared By: Manohar M. M. IyerVAS2010XMBA15P005