transforming six sigma into a service methodology john karolenko, director of project development...
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Transforming Six Sigma Into A Service Methodology
John Karolenko, Director of Project Development PHH [email protected]
September 15, 2005
Transforming Six Sigma Into A Service Methodology
John Karolenko, Director of Project Development PHH [email protected]
September 15, 2005
WelcomeWelcome
Introduction Background on PHH
Process Improvement in Service Delivery Why is PHH doing this? Challenges in the service sector The focus on the customer Progress to date
Who is PHH?Who is PHH?
PHH CorporationPHH Corporation
• PHH Arval is part of PHH Corporation Mortgage and vehicle management operations efficiently
provide outsourced services to corporate customers
PHH Mortgage is the sixth largest retail originator of residential mortgage loans in the United States
PHH Corporation (NYSE: PHH) has 7,800 employees in North America
Business ProfileBusiness Profile
• PHH Arval’s business history and culture are all about innovative customer service Industry leaders and innovators since 1946
Recognized leader in developing technology that enhances customer service
Diverse and experienced team of customer service professionals
Consistent track record of successful relationships
Business ScopeBusiness Scope
• PHH Arval is an industry leader in outsourced fleet management services for corporate clients and government agencies throughout North America Over 1,300 employees
600,000 vehicles under management
Provide services worldwide with global marketing partners
Purchase more than 80,000 vehicles annually
Strategic RelationshipsStrategic Relationships
• PHH Arval partners with thousands of organizations worldwide. Over 100 clients have been with PHH for 20 years
or more
What Exactly Does PHH Do?What Exactly Does PHH Do?
PHH provides services for: Lease funding Vehicle specification design & order processing Management of vehicle delivery, title & registration Comprehensive suite of maintenance & repair services Vehicle sale Consulting
Acquire Maintain Dispose
The Lifecycle of a Vehicle
Six Sigma &Six Sigma & Service DeliveryService Delivery
Three Years AgoThree Years Ago
• PHH detected a shift in our client’s focus. They wanted to know: PHH what are you doing to improve yourself?
How will you know that you have improved?
• What they really meant was: We’re working to improve ourselves
We only want to partner with organizations who can help us meet our improvement goals
Industry ChangesIndustry Changes
• More and more Six Sigma focused clients and prospects Becoming more common in every visit
Increased interest in PHH’s metrics that are displayed throughout our building
• Service Level Agreements (SLA’s) becoming more common Ascendancy of purchasing managers
Clients want to know how they perform against the baseline
OpportunityOpportunity
• This was an opportunity to gain a competitive advantage
Differentiate our service from competitors
Move PHH from “Good” to “Great” Establishing PHH as the clear
service leader in our industry• Competitors include GE
OpportunityOpportunity
• The timing was right PHH is a thriving organization, not one under threat
• No desperate times and desperate measures Having a solid foundation ensured that we had time to do
this right Building on a strong service delivery culture
Our ResponseOur Response
• A Six Sigma based program for improvement
• We chose Six Sigma for its: Proven track record
• Largely in manufacturing Readily available supply of:
• Knowledge• Skills• Tools
Our ChallengeOur Challenge
• Recognized immediately that PHH would have to adapt 6 to the service world PHH does not manufacture anything
Much of our service delivery is done through networks of service providers outside of our building
Our networks are often the visible face of PHH to our customers
PHH’s Approach
PHH’s ApproachPHH’s Approach
• We follow the basic DMAIC steps Data-driven Metrics-focused
PHH’s ApproachPHH’s Approach
We do employ trained Black Belts to customize our approach with the various processes that we support
PHH’s ApproachPHH’s Approach
• The service challenge How to keep service flowing while using the same resources
to improve it?
• Organizational readiness Leading change
• “If we’re doing fine, why do we need to do this?”
No traditional top down implementation• Started with our service delivery organization• Build wins & interest, then expand
PHH’s ApproachPHH’s Approach
• Specific focus on making the client central to our improvement effort Typically, efforts are focused on the adopting organization Client benefit is often, at best, an after thought PHH still expects to benefit from 6, but the client focus
directs where our efforts should be• If we focus on the right metrics, the dollars will follow
ChallengesChallenges
Challenges In The Service WorldChallenges In The Service World
• Perceptions against Six Sigma
• Gathering Data
• Client Customization
Some are unique to service, some are not
Challenges In The Service WorldChallenges In The Service World
• Perceptions against Six Sigma
“This isn’t manufacturing… Six Sigma doesn’t apply here”
“We never do anything the same way twice”
“How can you document a process when everything is an exception?”
“We do whatever it takes to satisfy the client. That’s our process”
Challenges In The Service WorldChallenges In The Service World
• Gathering Data Legacy systems
• Hybrid of system reporting and manual methods
Lack of recognition for the need to gather the data• “I know where the problem is…”
SurveysSurveys
• We do make extensive use of client & driver surveys While we incorporate this into our improvement efforts,
surveys represent lagging information Since we enforce client’s policy, not always a true measure
Challenges In The Service WorldChallenges In The Service World
• Client Customization In customized service delivery “Everything is an exception”
The standard process is the most frequently occurring exception
This is a fundamental issue for PHH• Our willingness to provide highly customized service is a
strength over our competitors• It’s also a source of variability in our service delivery
Services vs. ProductsServices vs. Products
• Service delivery is significantly more fragile that products It lives from experience to experience, based on perceptions At PHH long intervals between contact with drivers
• Because you can only experience a service as opposed to touching a product There is always some level of apprehension surrounding its
reliability and availability Vulnerable to misperceptions about service levels
Client FocusedClient FocusedA differentiator from our competitors
Client FocusedClient Focused
• In service delivery, PHH can’t Measure material waste Test product output
• Instead, we focus on those things that matter most to clients
• We’re only as good as our last service delivery experience!
Program FocusProgram Focus
Rally to Results is focused on:
SpeedSpeed
ReliabilityReliability
ValueValue
Program FocusProgram Focus
Speed of service delivery
Reliability of our service
Value that PHH brings to the customer
MetricsMetrics
SpeedSpeed How long does the process take?How long does the process take? How long How long shouldshould it take? it take?
ReliabilityReliability How often does it fail? Why does the process fail?
ValueValue Have we saved the customer money?
MetricsMetricsThe
MetricHierarchy
AverageSpeed ofAnswer
OrderReceived to
OEM
SpecificMeasures
OrderAccuracy
Registration RenewedOn Time
SubrogationRecovery
VMA Savings
First Run Yield SavingsCycle TimePHHFocus
Speed Reliability ValueClientFocus
Sub LevelData
ProcessSteps
Process Improvements
Vehicle Accident ServicesVehicle Accident ServicesA Case Study in Reducing Cycle Time
SM
Vehicle Accident Services:Key ObjectivesVehicle Accident Services:Key Objectives
• Increase Driver Productivity
• Ensure driver safety
• Get them back on the road as soon as possible
• Manage Costs
• Minimize repair time
• Manage the cost rental vehicles
• Choose the best repair/replace option
• Maximize recovery of damages
Property of PHH Arval
Vehicle Accident Services:The ProcessVehicle Accident Services:The Process
Driver Calls toReport Incident
Incident is Closed
SubrogationAssesses and
ManagesRecovery
DamageAuthorizes and
Manages Repair
DriverAssistanceCompletes
Report
Obtain EstimateAuthorizeRepairs
Follow up onRepair Status
Obtain FinalInvoice
Property of PHH Arval
Define: The ProblemDefine: The Problem
The VAS “Days to Shop” component of cycle time is
impacted by slow driver response time in obtaining
estimates or scheduling repairs.
• The average cycle time for the months of August and September
2003 was 15.7 days.
Property of PHH Arval
Define: The Detailed Process FlowDefine: The Detailed Process Flow
Was theestimate
obtained?
Contact driver forstatus of estimate
by letter (3 wks.) orIVR call (2 wks.)
EstimatedObtained
Was theestimate
obtained?
Contact shop; if noestimate contact
driver for status byletter (3 wks.) or IVR
call (2 wks.)
Was theestimate
obtained?
Contact driver; if stillno estimate contact
client by letter or email(30 days) and close in
2 weeks
Was theestimate
obtained?
Contact shop; if noestimate, close file as"closed without repair"
no
yes
no no no
yes
Driver Calls toReport Incident
Incident is Closed
SubrogationAssesses and
ManagesRecovery
DamageAuthorizes and
Manages Repair
DriverAssistanceCompletes
Report
Obtain EstimateAuthorizeRepairs
Follow up onRepair Status
Obtain FinalInvoice
Property of PHH Arval
Define: Begin the Business CaseDefine: Begin the Business CaseBusiness Case: Damage Control Fax Process Date: 1/29/04
Project Owner: L. Gamber/ J. Baker Version: 2.0
Project Summary Damage Control cycle time is impacted by slow driver response time in obtaining estimates or scheduling repairs.
Vision The driver will receive “real time” correspondence which will prompt the driver to take action in a more efficent time frame.
Problem Statement The Damage Control team, the subrogation team and the client are negatively impacted by delays in driver response time due to the current manual letter process. The current process is to mail a letter to the driver requesting that an action be taken within a specified period of time. When there is a lack of response by the driver, the Damage Control team is required to follow up more and an increased cycle time which reduces first run yield. Subrogation claim handle time is also increase creating a potential loss of recovery due to the statutes of limitations, which ultimately may impact the client on a financial level.
Objective Statement Criteria for Evaluation
Scope In Scope Out Of Scope
Assumptions
Constraints & Dependencies
Impact PHH Internal PHH External
Risk Factors
Stakeholders CVS Owners: T. Keilty D. Zuidema L. Gamber J. Baker Damage Control Team
BD Owners: N/A
Project Coach: K. Ridgley
Property of PHH Arval
MeasureMeasure
• Ran report to determine cycle time
• Manually tracked volume of mailings
Property of PHH Arval
AnalyzeAnalyze
VAS Cycle Time - Days to Shop
0
2
4
6
8
10
12
14
16
18
Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04
Cyc
le T
ime
(in
day
s)
Days to Shop
Property of PHH Arval
AnalyzeAnalyze
• Average Days to Shop cycle time = 14.4 days
• Annual volume of mailings = 11,124
• Time spent on mailings = 742 hours annually
Property of PHH Arval
Improve Improve
• Implementation Plan: Driver follow up letters will be emailed instead of mailed whenever
possible. The follow up time between communication attempts will be
reduced from 3 weeks to 1 week.
• Goals: Reduce driver mailings by 70% Decrease Damage Control cycle time by 5% Increase Damage Coordinator productivity by 3%
Property of PHH Arval
ControlControl
VAS Cycle Time - Days to Shop
0
2
4
6
8
10
12
14
16
18
Aug'03
Sep Oct Nov Dec Jan'04
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan'05
Feb Mar Apr May Jun
Cyc
le T
ime
(in
day
s)
Days to Shop Linear (Days to Shop )
Improvement Implemented
2/18/04
Property of PHH Arval
ControlControl
Results:
•Reduced annual volume of mailings by 76% 5,200 to 1,500
•Decreased cycle time by 35%, from 14.4 days to 9.3 days
•Decreased touch time by 57%
Property of PHH Arval
Six Sigma Still AppliesSix Sigma Still Applies
• Fundamentals of Six Sigma still apply DMAIC Five Whys Data driven Pareto tool Reducing variability in processes Shifting the mean
SustainingSustainingThe EffortThe Effort
Client VisitsClient Visits
Client VisitsClient Visits
• An opportunity to ensure clients understand what we’re working to achieve on their behalf Process improvement is central to every client visit We typically meet with clients before they see our service
areas Lead with our metrics by posting them in every service area
• 10 Displays – All focused on Speed, Reliability & Value
• Almost 50 key metrics visible to anyone who walks in the door
– Requires courage to take this risk
Client VisitsClient Visits
• A dialogue with our visitors PHH’s approach to process improvement What clients can expect from PHH Encourage clients to ask our managers
• “What are you working on?”• “How will my drivers benefit?”
Discuss a case study illustrating our efforts
RecognitionRecognition
R2R Stars Are Awarded For:Bronze Quantifiable financial benefit
between $1,000 and $5,000 or
Observable improvement in one or more process metrics
Silver Quantifiable financial benefit between $5,000 and $25,000
Gold Quantifiable financial benefit above $25,000
Craig PijanowskiASE Certified Mechanic
Maintenance Team Leader
Key ThoughtsKey Thoughts
• Six Sigma is still highly effective in the service realm
• Need to be flexible in adapting it to services
• Must focus on what’s important to the customer
QuestionsQuestions