Best practices on cost reduction using Lean Six Sigma


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Best practices on cost reduction using Lean Six Sigma

  1. 1. Best practices on cost reduction using Lean Six Sigma
  2. 2. CenturyLink Overview <ul><li>CenturyLink formed from the merger of two large telecom providers </li></ul><ul><li>$8.8 billion of revenue and $3.8 billion of EBITDA </li></ul><ul><li>Headquarter: Monroe, LA </li></ul><ul><li>S&P 500 company / expected to be Fortune 500 </li></ul><ul><li> </li></ul>
  3. 3. Leading Communications Provider
  4. 4. EMBARQ BPI Evolution <ul><li>2005 – 2006 EMBARQ separates from Sprint </li></ul><ul><li>- EMBARQ formed through spin-off from Sprint </li></ul><ul><li>- Focus on spin-off activities </li></ul><ul><li>2006 – 2007 Shotgun approach </li></ul><ul><li>- Heavy training/tool focus through Six Sigma </li></ul><ul><li>- Put it in the business & let them go </li></ul><ul><li>- Limited quantifiable benefit </li></ul><ul><li>2007 - 2008 Business partnership </li></ul><ul><li>- Moving away from tool focus </li></ul><ul><li>- Lots of projects </li></ul><ul><li>- Kaizen implemented to drive quick results </li></ul><ul><li>- Great business benefits, but lost in the business </li></ul><ul><li>2008 - 2009 Heavy initiative focus </li></ul><ul><li>- No tool focus (use the tools where appropriate) </li></ul><ul><li>- Don’t use the words Lean or Six Sigma (BPI only) </li></ul><ul><li>- Big quantifiable results!!! </li></ul>
  5. 5. Business Process Improvement: Looking Back <ul><li>Partnering with business units to work on business unit specific initiatives </li></ul><ul><ul><li>Wholesale </li></ul></ul><ul><ul><ul><li>Completed 2 Kaizen events: VoIP, Switch Access PIU </li></ul></ul></ul><ul><ul><ul><li>Future areas of focus include: Fiber Access, ICB Special Pricing, Sonet Services </li></ul></ul></ul><ul><ul><li>Consumer </li></ul></ul><ul><ul><ul><li>Completed 1 Kaizen event: Call Escalation </li></ul></ul></ul><ul><ul><ul><li>Future areas of focus include: Compensation Cycle Time, IVR, Sales Reporting </li></ul></ul></ul><ul><ul><li>Business </li></ul></ul><ul><ul><ul><li>Limited opportunities identified </li></ul></ul></ul><ul><ul><ul><li>Currently conducting analysis of operating metrics within sales support and care function </li></ul></ul></ul><ul><ul><li>Network </li></ul></ul><ul><ul><ul><li>Completed 3 Kaizen Events: Ethernet Provisioning, Fiber to the Premise (FTTP), ACTL POI </li></ul></ul></ul><ul><ul><ul><li>Future areas of focus include: NSM and Production Planning assessment </li></ul></ul></ul><ul><ul><li>Revenue Management </li></ul></ul><ul><ul><ul><li>Completed BPM build for auto promo code process </li></ul></ul></ul><ul><ul><ul><li>Future areas of focus include: 7 Additional BPM builds </li></ul></ul></ul><ul><ul><li>IT </li></ul></ul><ul><ul><ul><li>Currently addressing Asset Recovery processes </li></ul></ul></ul><ul><ul><ul><li>Future areas of focus include: adding additional areas for asset management </li></ul></ul></ul>
  6. 6. BPI Program Goals <ul><li>Aggressively drive an enterprise-wide process improvement initiative </li></ul><ul><ul><li>Agreed upon financial targets and timelines to realize those targets </li></ul></ul><ul><ul><li>Focused on helping achieve 2009/2010 business-wide targets </li></ul></ul><ul><ul><li>Develop detailed design information for the individual processes (sub-processes) that result in the highest financial and/or customer impact </li></ul></ul><ul><ul><li>Support execution/implementation of the new processes, including communications, management of organizational change and formal documentation of new processes </li></ul></ul><ul><li>Focus on end-to-end efforts in addition to BU issues </li></ul><ul><ul><li>Look specifically for agreement on key processes to attack for the initiative </li></ul></ul><ul><ul><li>Business-centric issues prioritized between each other to ensure optimal benefit </li></ul></ul><ul><ul><li>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 </li></ul></ul><ul><li>Ensure that gains are recognized and sustainable </li></ul><ul><ul><li>Establish a program management function to ensure that the process changes hold and, as importantly, that the planned benefits are being achieved </li></ul></ul>
  7. 7. Phase 1 <ul><li>Establish and prioritize the list of end-to-end processes to be reviewed </li></ul><ul><li>Allocate team members based upon highest return/highest impact processes </li></ul>Concurrently: Establish impacts to the overall enterprise and the associated interactions
  8. 8. The Business Process Improvement Approach High Speed Internet Identification of core focus areas within & across lanes EMBARQ BPI Analysis Improvement Opportunities & Roadmaps New Build Economics Supplier Contracts Parts & Materials Customer Contracts Extensive Data Collection Overall Objective: Identify tangible improvement opportunities aligned to EMBARQ’s 3 year operating plan
  9. 9. What we’ve heard … <ul><li>Several broad themes span the individual BPI process areas. </li></ul><ul><li>End to End Process Ownership </li></ul><ul><li>We have limited E2E process ownership and/or metrics to sustain on-going change </li></ul><ul><li>Multiple VPs touch each process </li></ul><ul><li>Competing initiatives appear across processes </li></ul><ul><li>Fixes in one area cause problems in another </li></ul><ul><li>Individual measures need to support broad process changes </li></ul><ul><li>Help Enable Change </li></ul><ul><li>People have indicated they’re ready for improvements, but … </li></ul><ul><li>Broad change causes anxiety </li></ul><ul><li>People are reluctant to suggest cross-functional change </li></ul><ul><li>“ We tried that in the past” and “It will never work” resistance </li></ul><ul><li>Need to align compensation / rewards with process goals </li></ul><ul><li>Better Forecasting is a Necessity </li></ul><ul><li>Vendor’s require excessive lead time and our costs increase due to limited forecasting </li></ul><ul><li>We’re missing revenue due to our inability to tie exhaust to customer forecast </li></ul><ul><li>Capital planning is sub-optimal </li></ul><ul><li>We overstock because of forecasting variability </li></ul><ul><li>Data Issues </li></ul><ul><li>Unnecessary truck rolls due to poor plant data quality </li></ul><ul><li>We’re not fully leveraging assets due to our inability to track them </li></ul><ul><li>We’re less efficient due to multiple re-keying and data errors during the customer provisioning process </li></ul>Common Pain Points
  10. 10. Phase II <ul><li>Capture existing processes and metrics including current costs by function </li></ul><ul><li>Identify appropriate approaches to solve associated problems </li></ul><ul><li>Provide an end-to-end graphical view of process steps and cost impact </li></ul><ul><li>Determine highest cross functional impact </li></ul><ul><li>Gain executive buy-in on proposed changes and benefits </li></ul>
  11. 11. Phase III <ul><li>Execute design sessions for sub-processes that were identified during Phase II </li></ul><ul><li>Develop a plan for the quantification and ongoing measurement of the planned improvements </li></ul><ul><li>Revise the end-to-end maps based upon the detailed design sessions </li></ul>
  12. 12. Supplier Contracts <ul><li>Key Accomplishments: </li></ul><ul><li>Contract Compliance </li></ul><ul><ul><li>Identified root causes of violation spend </li></ul></ul><ul><ul><li>Updated Network methods & procedures, posted updates to Network Services intranet site and delivered training to address identified gaps </li></ul></ul><ul><li>Supplier Management </li></ul><ul><ul><li>Completed scorecard assessments and executive review sessions with 12 critical suppliers (integrated supplier risk management into program) </li></ul></ul><ul><ul><li>Integrated supplier risk management (financial & IP) into the program & executive discussions </li></ul></ul>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
  13. 13. 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. <ul><li>Recovered to inventory - $XX plus over $XX in plug-in cards </li></ul><ul><li>Consignment sales - $XX </li></ul><ul><li>Scrap Sales - $XX </li></ul><ul><li>XX pallets of product </li></ul>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 <ul><li>X of X currently above XX%. </li></ul><ul><li>One supplier dropped due to decreased spend. </li></ul><ul><li>Seven suppliers improved year-over-year </li></ul>
  14. 14. Customer Contracts Initiative Before BPI After BPI Government Repository (Pramata) <ul><li>The contract repository tool (ASP) stores contracts by year which made gathering the entire contract difficult. </li></ul><ul><li>Not all contracts were stored in ASP – some resided with sales personnel in the field or could not be located at all </li></ul><ul><li>Special Ts&Cs were not consistently identified and managed </li></ul><ul><li>Government contracts will be centrally stored and easily accessible. </li></ul><ul><li>Key/special terms and conditions are extracted and catalogued in a contract summary </li></ul><ul><li>Data requests can be managed quickly via repository reporting capabilities </li></ul><ul><li>Contract with Pramata is expandable to other contract types, for example supplier and real estate </li></ul><ul><li>Provided an overview and demonstration to CTL. Reviewing possible integration with their contracts </li></ul>Terms and Conditions <ul><li>Uncertainty as to what contract documents existed </li></ul><ul><li>Terms and conditions were not consistent across documents and may have been outdated or non-applicable to today’s operating environment </li></ul><ul><li>Clear understanding of what contracting documents and gaps exist </li></ul><ul><li>Internally provided a website matching the tariffs, terms and conditions to the product Improvement recommendations prioritized and in progress </li></ul>
  15. 15. New Build Economics Accomplishments Results <ul><li>Stood up Capital Targeting Tool for evaluation of projects to determine economic viability </li></ul><ul><li>Billing and deposit methodology was created and implemented in cases where it was determined developer assistance was required </li></ul><ul><li>Generated shareholder value through investing only in those New Builds which offer an opportunity for an acceptable return </li></ul><ul><li>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 </li></ul><ul><li>Continue project reviews for New Service Addresses in 2009 </li></ul><ul><li>Continuing process improvement </li></ul><ul><li>Brings efficiency and consistency to the economic evaluation process; XX projects were reviewed from May to December </li></ul><ul><li>XX bills have been calculated and sent to developer for deposit or aid to construction </li></ul><ul><li>Projects found to be uneconomic resulted in a Cap-Ex reduction of $XX </li></ul><ul><li>The process improvement initiatives provided for a XX% cost decline in our preferred FTTP technology </li></ul><ul><li>$XX is forecast to be reviewed and billed due to economic viability </li></ul><ul><li>Reduced cycle times, economic review completed in farther in advance of project construction dates </li></ul>
  16. 16. 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. $XX Tangible Customer Facing Equipment Implement database to store, trace and help proactively troubleshoot new and refurbished equipment serial #’s at the household level. <ul><li>$XX to $XX </li></ul><ul><li>Flexible pricing strategy </li></ul><ul><li>(Numbers based on CenTel current modem lease program) </li></ul>Records Clean-Up Pre-Grooming & Records Clean-Up Pilot <ul><li>Verify and correct records and pre-groom all primary capable lines in the Gardner market. </li></ul><ul><li>Conducted pre-pilot time and motion study baseline the pilot in the Gardner market. </li></ul><ul><li>Reduced dispatches & clear times </li></ul><ul><li>Fewer trouble calls & internal calls to support groups </li></ul>0, -1, +1 MEDR Errors Address unnecessary escalations that are a result of errors in MEDR. Improve process for correcting records. <ul><li>$XX rev opportunity </li></ul><ul><li>Fewer trouble calls </li></ul>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
  17. 17. Summary <ul><li>Targeted approach worked best for EMBARQ </li></ul><ul><ul><li>Find the 5 biggest issues confronting the business </li></ul></ul><ul><ul><li>Dogged approach </li></ul></ul><ul><li>Leadership engagement the key – can’t be successful without </li></ul><ul><li>Cannot lead with the tools – goes in one ear and out the other </li></ul><ul><li>Lead with results – don’t even talk about the tools unless necessary </li></ul>